We’re all aware of the general concept of Social Security Benefits – monthly payments to qualified Americans generally received when one attains “retirement age.” But many of us are not so familiar with Supplementary Security Income, a counterpart of Social Security. For expats, there is a good reason why many are not so familiar with the latter, as will be explained below.
But first some basics regarding Social Security payments. A US citizen (generally, wherever he or she resides) or a “lawfully present alien” (generally, in the US) becomes eligible to receive monthly Social Security “retirement” benefits when he or she 1) becomes “insured”, which means having enough work credits (which used to be referred to as “quarters”,) and 2) attains the age of 62 or older. It should be noted that a person who applies for retirement benefits between the ages of 62 and the attainment of full retirement age (which varies between age 65 and age 67, depending on the year of a person’s birth) receives a reduced monthly benefit. See below for more details on benefit reduction.
A person can earn up to four credits per year, based on annual (US-based “W-2”) wages and/or worldwide self-employment income (provided it’s reported as such to the USA – see below.) The amount of earnings required for a credit changes each year. In 2021, a worker earns one Social Security or Medicare credit for every $1,470 in covered earnings. Therefore, a person who earns $5,880 in a year will receive the maximum four credits for the year. A person born after 1928 needs 40 credits to qualify for retirement, which can be achieved in a minimum of 10 years of employment or self-employment.
In general, the amount of a person’s monthly retirement benefit is determined by the Social Security office based on one’s personal history of annual US-based “W-2” income or worldwide self-employment income, as reported on timely-filed US income tax returns, with records of timely paid income and self-employment taxes. The calculated monthly benefit represents the amount that will be paid beginning with the month in which the person attains full retirement age. Note that it possible to accelerate or defer benefit payments, and that this will affect the monthly amount received.
An important point for expats in Israel to remember is that under Article 21 of the US-Israel Tax Treaty, if a US citizen is a resident of Israel, i.e. he or she maintains a permanent home in Israel, any Social Security benefits received during the year are exempt from US income tax.
Some points regarding reduced benefits. In order to receive benefits from the age of 62 until one reaches full retirement age, a person has to show that he or she works less than 45 hours per month. In addition, the benefits received will generally be reduced, depending on one’s age, and the amount of income still being earned. A person who is under full retirement age for the entire year will have $1 deducted from his or her benefit payments for every $2 earned above the annual limit, which for 2021 is $18,960. Note that once a person reaches full retirement age, there is no work restriction and any earnings no longer reduce the annual benefit.
Supplemental Security Income (SSI) is administered by, and related to Social Security, but differs in the following ways. SSI benefits are not based on prior work. They are paid as monthly benefits to persons with limited income and resources, who are age 65 and older, or who are disabled. But expats please note that in order to receive SSI benefits, a person must either be a US citizen or a qualified alien, and must reside in the USA, or the Northern Mariana Islands (don’t ask – I have no idea), and must not be absent from the USA for a full calendar month or 30 or more consecutive days (unless, I suppose, one is visiting the Northern Mariana Islands, but don’t take my word for it.
