Taxation Question, US Federal Retirement & TSP

[BornAgainGerman 0]

Greetings! I recently retired from the United States Government -- Executive Branch, non-military -- and have moved to Germany to reside with my German national partner. She guided me through the process of getting my German Residence Card (one year, renewable, I suppose) and now I've rented a house. Now I am looking at taxation issues. I have two components to my retirement pension right now, as I am 55 years old and not yet eligible for social security: (a) my actual federal pension. It seems from what I've read online that my actual federal pension is non-taxed by the government of Germany. That seems to be good news. (b) my Thrift Savings Plan income. I don't have an annuity but in the near future I plan to start drawing down my TSP in even monthly payments based upon my life expectancy. Is TSP income taxable in Germany?

Thanks very much for any information anybody has to offer. 

[garyh911 138]

Is it regular Social Security that you are talking about that you qualify for at a minimum 62 years old?  That is fully taxable in Germany as is all of your income from the US.  I have a private pension from a hospital that I am taxed on here.  I've been here for 7 years and have to pay German income tax since I have residency here.  And I also file a US income tax return.

[Nickles and Dimes 3]

Did you have any issues collecting 2 pensions?

More specifically, the US govt, SSA's WEP?

If you collect a USA Social Security pension and a foreign pension, the USA pension will be reduced due to the Windfall Elimination Provision. Unlike foreign pensions, USA SS pensions compensate generously people who work less than 30 years by paying them MORE than what they should normally receive. The rationale is that workers who were employed less than 30 years will not have enough in retirement and will need supplemental income. However, if a person is working and contributing to a foreign pension system, then the USA govt. sees it differently, i.e., this person is not in need as we assumed due to the fact that they will be collecting 2 pensions. (In many ways, it's a very socialist concept - spread some of the SS wealth to those in need. Unlike the German pay-as-you-go, you only get what you give system). What this means, is that your USA SS pension will be reduced, by anywhere from 20-45%, IF you receive a foreign pension during the same time period. Having 20+ years with USA SS is a bonus. Your SS reduction should be smaller. That said, some expats retire at age 62 (or 63,64,65 ..) which results in a permanent 30% reduction in their SS - since full retirement is 67 - however they will not apply for their German pension until age 67, so they have 5 years of full (age 62) SS payments without any WEP reduction . Of course, when they reach age 67 and collect their German pension, the USA SSA will apply the WEP and reduce their USA SS and there will be considerably less. How much depends on how many years they worked in the USA. Use the SSA website: WEP calculator for an estimate. By the way, if you "run" your numbers, you may find out that the amount you receive from the USA SS if you retire at age 62 will put you ahead financially than if retire at age 67, at which time you will have to take the WEP and a reduction in your SS check. How far ahead might you be if you retire at 62? Some expats have figured out that the breakeven point if one takes SS at age 62, rather than 67, is not reached until age 88,89.