U.S. Social Security

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Hi everyone,

I would like to obtain more information about USA Social Security pensions for expats living in Germany

More specifically, the rules and regulations on retiring in Germany with 2 pensions: USA Social Security pension and German Rente (pension). My situation is that I will retire at age 62 with a USA S.S. pension after having working 22 years with a German company here in Germany. My health insurance is public (statutory). I will receive a German pension at age 67. The Deutsche Rent has sent me information but there is very little info. available about how the 2 pensions will be regulated. I am aware of how the taxes work, Totalization Agreements, so I do not need more info. on that topic. I've asked the USA SSA - Social Security Administration - for more information, but they only refer me to their website links in emails. Firsthand experience from U.S. retirees in Germany would be very welcome! (Searching online? I have searched everywhere and come up with very little)

 

Does anyone have specific experience or specific knowledge concerning:

 

1. USA S.S. WEP - Windfall Elimination Provision: if one collects a USA S.S. pension and a foreign pension, the USA S.S. may be reduced by up to 40%.

2. Working during retirement: in the U.S. there is a maximum income limit imposed by the SSA "How We Deduct Earnings From Benefits. In 2021, if you're under full retirement age, the annual earnings limit is $18,960. If you will reach full retirement age in 2021, the limit on your earnings for the months before full retirement age is $50,520."

What are the limits if one is a resident in a foreign country, like Germany? (Someone indicated that the income thresholds above do not apply, but that Americans are limited by work hours/month - something like 45hours/month?)

3. Health Insurance: if a person retires early with USA S.S. pension - before age 67 -  how is their German health insurance

affected? If the person is obligated to pay on their own, would they re-enter the public health system at age 67, when they collect their German pension?

 

Thanks very much!

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2. Yes appears you benefit is also income tied https://www.escapeartist.com/blog/drawing-social-security-while-working-in-a-foreign-country/

3. As far as insurance you you are going to pay at least 7.3 percent of your usa ssa amount for public insurance not sure if you also must pay the long term care piece. You will continue to pay this even when you recieve a german pension i believe up until you meet the income cap of 7100 euros. The money earned in ssa has never contributed to the german insurance so it is taxed when you recieve it. Othe non goverment pension like usa private ones and even possible 401k withdrawls get even more complicated some requiring a 14.6 contribution to Public insurance recieving foreign  income sources is not cheap in retirement. This is MY inderstanding i would be THRILLED if i am wrong. Same would apply to a spouses for income.

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Thanks very much, lunasuenos!

One problem is that the SSA, which oversees S.S., has some vague phrasing in their rules and regs. In one pdf  put out by the SSA, I read that expats can only work 45hours/month if they collect their USA S.S. early, that is, before age 67. In another paragraph of the same doc., it stated that this max. amount is 15-45 hours/month in certain cases (skilled labor, business owners,etc.) .

 

UPDATE: Just contacted my health ins.: The TK customer service person was fairly good. He took about 20-25 minutes to explain things. His opinion, as I feared, was that I would pay 100% of the voluntary health ins. until age 67 - when I register for my German pension. At age 67, my health ins. would have to recalculate my contribution to determine how much the govt. would contribute to the health ins. The 50-50 split that I receive now with my employer would, in TK's opinion,  not be picked up by the govt. until age 67, and they might not pay 50%, but less, like 30-40%.

Jeez! They've really got everyone by the you-know-what!

 

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Keep in mind even if your german pension contibutes the 7.3 % out of ssa will still be due. The cheapest way to pay sel insurance if not working for a german employer is to burn through any german savings first, paying only the savings rate for insurance about about 190 a month letting your ssa increase in amount. If you happen to have a spouse and the spouse gets ssa as well then this 7.3 applies there also and would affect your family plan under public insurance if you use that. Another option is to play with 401k withdrawls to get the lowest tax and insurance rate before starting ssa. In my case i have a large abfindung payment that we will live off for many years before taking any ssa and make small 401k withdrawls to get the lowest rates. Also keep in mind once you hit medicare age you need to start part B if you ever plan to return to usa otherwise you pay a penalty cost if you try to activate it later. Will be making a deeper investigation into taxes and insurance costs on 401k soon as it is very complicated and few steuerberatos understand this well that i have found.

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Using savings sounds like an option I should look into. I wonder if there is the possibility of "locking in" a fixed rate by paying up front for healthcare? And private health ins.? Don't know, for my age it looks pricey.

Yes, the issue with IRAs (tax deferred investment savings) seems to be the greatest problem. How to spend down (or withdraw and save) a 401K appears complicated. My 401K is actually a 403(b) (public schools or churches) and I stopped paying into it in 2005, when I started working here in Germany. Some people have said it will be taxed like regular income if it was started before 2005, which it was, while others say I may have to pay capital gains taxes just like one would on an investment portfolio.

Let me know how it goes with the 401K and how the Finanzamt views it. I'm going to try to contact an American CPA I used some years ago who was well-informed about the German tax system.

 

As far as delaying and deferring my SS until later, I still need to do the backward calculation of taking my SS at age 70 and gaining 24% in benefits. My assumption so far is that deferring my SS would work better in the U.S., but with a German pension to be collected at age 67 I will fall under the SSA's WEP rule and my SS will be reduced. I've actually calculated my S.S. WEP on my own, and with the SSA's WEP calculator. The SSA's calculator is generous and does not reduce my pension by as much as my own calculation.  (Most other retirees I have spoken with say that they experienced a 35-40% reduction in their SS when they activated their foreign pension.) Looking only at SS, financially, the breakeven point for me between taking SS at age 62 or 67 is around age 88/89. Meaning that not until age 88/89 would taking SS at age 67 be financially more profitable (the age 67 SS would begin to surpass the age 62 SS in total value). (In addition to SS, I also collect a U.S. city employee pension - which starts at 62 without any benefit if one defers it)

 

https://scheller-international.com/blog-beitraege/german-income-taxation-of-us-pensions-and-similar-retirement-provisions.html

 

https://www.taxesforexpats.com/expat-tax-advice/expat-tax-101.html

 

 

 

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You cant prearrange the cost it is based on your annual income. If just savings and no income then its the lowest rate. It is reviewed every year. What is critical is the source of any income you bring in. One thing you do not want to do is to try a temporary private option. If you get out of public you will not get back in. Even if you had to pay the highest rate for public, private would be higher at our age. Be careful with a city pension this is where it gets gray. That could be subject to 14.6 for insurance as it is foreign income that never paid social costs. Private usa pensions have same gray area. When they tax foreign pensuons it is more like a retroactive tax for have money that did not pay in rather then paying for your current insurance.  I myself could qualify for german social security via unemployment with the minimum 60 months. But i will stop unemployment before i hit the qualification and take my contrubutions when we leave, rather then getting the measly payment and wep.

 

Scheller is a excellent source i am going to try to contact them but seem to only consult to other accoutants. I also use taxes for expats but really depends who they assign to you i think. Will advise if i get better info on 401k

 

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11 hours ago, HH_Sailor said:

Is retiring at 63 and taking the German pension (less 10.5%) an option?

 

Yes, I have considered age 63. It might be a very good idea. Even after 22 years employed in the German pension system, the German pension won't really amount to much. This is the downside, however the upside is that I could delay my SS until 67 or 70 and receive more. And, the smaller amount of the German pension would not impact my USA SS as much when they do the WEP calculation.  So, taking early retirement in the German system could be the solution. i assume my other USA city pension would start at age 62 and  be factored in as income with the German pension to determine healthcare costs. But I'm a still unsure about all this and am looking at the finer details in the rules and regulations.

The link below seems to state that healthcare companies want a piece of foreign pensions and that foreign pensions must be reported to the healthcare company as total income. ( I assumed that this was a given, that people added up all their incomes (or is it just pensions?) and then the healthcare costs were computed from the total income (or total pension incomes)?

https://www.ecovis.com/hannover/auslandsrenten-werden-beitragspflichtig-in-der-kranken-und-pflegeversicherung-neue-meldepflicht-fur-grenzganger/

 

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4 hours ago, Nickles and Dimes said:

Even after 22 years employed in the German pension system, the German pension won't really amount to much.

Depends as well what you pay in and what kind of life-style you want as a pensioner. After 15 years, I'm already in the 4-digits myself, but I'm glad that I have 2 private pensions and 1 company pension on top of that.

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"Depends as well what you pay in and what kind of life-style you want as a pensioner."

Good point. I'd like to still travel in my 60s and that will cost $$$. (Can't say I really see as much enjoyment to be had later on - 70s, 80s - and 90s!) All told, I'll have enough (3 public pensions, 2 private pensions, stock portfolio, an inheritance).  It's just a matter of when each should be activated, and, how early I can retire.

More is certainly better. I've never met a retiree yet who said, "I should've saved less."

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On 2/24/2021, 11:33:53, HH_Sailor said:

Is retiring at 63 and taking the German pension (less 10.5%) an option?

 

Well, it looks like 63 might be the sweet spot to retire, due to the fact that it would keep me in the system and in statutory healthcare, which has tax advantages over the voluntary healthcare. (I could also defer my USA SS until 67 or 70 and receive more $$.)

A decent book I bought (2015 ed.) "used' for about 5-6 euros is: Finanzplaner 60+: Steuern, Recht und Finanzen für die zweite Lebenshälfte

https://www.medimops.de/isabell-pohlmann-finanzplaner-60-steuern-recht-und-finanzen-fuer-die-zweite-lebenshaelfte-broschiert-M0386851371X.html?variant=UsedVeryGood&creative=Shopping&sitelink=&gclid=EAIaIQobChMIwaCK6qaH7wIVmYbVCh0M9A_fEAYYASABEgLXX_D_BwE

 

 

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On 2/24/2021, 11:33:53, HH_Sailor said:

Is retiring at 63 and taking the German pension (less 10.5%) an option?

 

yes, 63 is something that needs to be looked at. staying in the statutory german insurance is a priority since i will be mostlly here rather than there -usa.. (usa health ins. is ridiculous even if you can afford it. dental is excluded and out of pockets costs often reach into the (tens of)1000s - and no one blinks an eye 'cause they're used to it.

( the book i bought gave a figure of something like 14.4% ( 3.6%/year?) a the reduction that would be applied for someone who retires at 63 instead of 67. but i think it is calculated (reduced) by each month you retire early.)

 

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You mention you have a city pension at 62. Can you also delay this? If not then most likely you will pay close to 18%  for insurance based on this. 14.6% + 3.3% long term care. (With kids its slightly lower) this is always in addition to what is paid by your german pension. So if you have to start city pension you will pay your insurance out of your city pension anyway so no need for german pension to pay, as well. Long term care is always paid both sides on all retirement money. About only foreign pension that gets taxed on 7.3% is probably ssa. So figure arounf 18% on all oension money until you hit the contribution cap which isabiut 4800 euros gross per month. After that you dont pay any more. Dont think 401k is subject to health insurance just income tax. Also dont think there is any tax credit for health insurance payments. Just my understanding. Your best financial bet in without question is if you can draw down non tax deferred savings without starting pensions. You pay 190euros a mo th for insurance (savings rate) your pensions continue to  grow and you save up to 18% payment out of your pension for insurance which would probably exceed 190 a month anyway. Just my opinion and understanding

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Why dont you make a rough estimate of all ponential ncome sources, estimated amounts  and age and send this off to tkk for a formal review. This would give you the most accurate info. 

 

 

 

 

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2 hours ago, Nickles and Dimes said:

yes, 63 is something that needs to be looked at. staying in the statutory german insurance is a priority since i will be mostlly here rather than there -usa..

 

You should first look into whether you'll be admitted into the KVdR (Kran­ken­ver­si­che­rung der Rentner).

 

2 hours ago, Nickles and Dimes said:

( the book i bought gave a figure of something like 14.4% ( 3.6%/year?) a the reduction that would be applied for someone who retires at 63 instead of 67. but i think it is calculated (reduced) by each month you retire early.)

 

 

It also depends on how old you are. 

 

I would recommend getting professional advice from someone who understands the German pension system and the special circumstances of foreigners in Germany. 

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20 hours ago, lunasuenos said:

You mention you have a city pension at 62. Can you also delay this? If not then most likely you will pay close to 18%  for insurance based on this. 14.6% + 3.3% long term care. (With kids its slightly lower) this is always in addition to what is paid by your german pension. So if you have to start city pension you will pay your insurance out of your city pension anyway so no need for german pension to pay, as well. Long term care is always paid both sides on all retirement money. About only foreign pension that gets taxed on 7.3% is probably ssa. So figure arounf 18% on all oension money until you hit the contribution cap which isabiut 4800 euros gross per month. After that you dont pay any more. Dont think 401k is subject to health insurance just income tax. Also dont think there is any tax credit for health insurance payments. Just my understanding. Your best financial bet in without question is if you can draw down non tax deferred savings without starting pensions. You pay 190euros a mo th for insurance (savings rate) your pensions continue to  grow and you save up to 18% payment out of your pension for insurance which would probably exceed 190 a month anyway. Just my opinion and understanding

Correct, the city pension starts at 62, no deferment bonus like SS. (And, my understanding is that a foreign pension like SS or a city pension won't qualify for any reduced rate with healthcare - I'll will be categorized "voluntary" not "statutory" and pay the approx. 18%) So, yes I am now thinking more and more about using savings (in some form or another).

The question is: How would I qualify for the "savings" rate for healthcare contributions? What would my income situation have to be? What is the process?

Thanks again!

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20 hours ago, engelchen said:

 

You should first look into whether you'll be admitted into the KVdR (Kran­ken­ver­si­che­rung der Rentner).

 

 

It also depends on how old you are. 

 

I would recommend getting professional advice from someone who understands the German pension system and the special circumstances of foreigners in Germany. 

 

Yes! That will be a must. Right now, I'm trying to see how the pieces "might" fit together.  Not so far in the future, I will have to juggle  a few things back in the U.S. like estate and property taxes, etc. Biggest problem is finding someone who really understands both systems - USA and Germany.

 

Thanks very much!

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20 hours ago, lunasuenos said:

Why dont you make a rough estimate of all ponential ncome sources, estimated amounts  and age and send this off to tkk for a formal review. This would give you the most accurate info. 

 

 

 

 

Yes, I'm thinking it would be best to do that. Surprisingly, my initial conversations on the phone with TK were quite good, but it is difficult to get firm responses.

Thanks.

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On 2/24/2021, 9:21:26, lunasuenos said:

You cant prearrange the cost it is based on your annual income. If just savings and no income then its the lowest rate. It is reviewed every year. What is critical is the source of any income you bring in. One thing you do not want to do is to try a temporary private option. If you get out of public you will not get back in. Even if you had to pay the highest rate for public, private would be higher at our age. Be careful with a city pension this is where it gets gray. That could be subject to 14.6 for insurance as it is foreign income that never paid social costs. Private usa pensions have same gray area. When they tax foreign pensuons it is more like a retroactive tax for have money that did not pay in rather then paying for your current insurance.  I myself could qualify for german social security via unemployment with the minimum 60 months. But i will stop unemployment before i hit the qualification and take my contrubutions when we leave, rather then getting the measly payment and wep.

 

Scheller is a excellent source i am going to try to contact them but seem to only consult to other accoutants. I also use taxes for expats but really depends who they assign to you i think. Will advise if i get better info on 401k

 

"if you get out of public you will not get back in"

Good point. I read a lot about this topic. For anyone contemplating leaving "public" - don't do it! Unless, of course, you've got the bucks to pay. In my opinion, even if you have the money, it's better just to stay in public and pay any "extras" you might desire. With my "public" ins. I've been receiving "private" healthcare services since I was first enrolled. I pay a few extra euros here and there to these "private" doctors.

And compared to U.S. healthcare? It's like a bargain basement fire sale.

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You qualify for the savings rate by having no income. Its actually called something else officially I think when you are at a point of ending your employment you notify your i surance you will self payand have no income and live off savings and set up the deduction from you bank. Thats about it. Not sure where you work, but is it possible you can volunteer  forlayoff if they have any? Then go to unemoyment insurance is paid, they co ti ue to pay pension and you could maybe get 18 months to 2 years. In my former company they did this to allow younger people to stay but i know it not available  everywhere.

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