The Shocking Amount of Social Security Money That’s Going to Foreign Countries
Many people are surprised to learn that a significant amount of U.S. Social Security money is being sent to foreign countries. This phenomenon is largely due to the complex rules surrounding international Social Security benefits and the agreements the U.S. has with other nations.
### How Does It Work?
The U.S. Social Security system is designed to provide benefits to eligible recipients, including U.S. citizens living abroad. However, the rules can become complicated when it involves non-U.S. spouses or beneficiaries living in countries with which the U.S. has Totalization Agreements. These agreements are in place to prevent dual taxation and ensure that workers are not required to pay into two different Social Security systems simultaneously.
Currently, the U.S. has Totalization Agreements with 30 countries, including major European nations, Australia, and Japan[1]. These agreements allow workers to combine their work credits from different countries to qualify for benefits, which can sometimes result in payments being made to individuals living outside the U.S.
### Who Receives These Payments?
Non-U.S. spouses can receive Social Security survivor benefits under certain conditions. For instance, if a U.S. citizen and their foreign spouse lived in the U.S. for at least five years as a married couple, the non-U.S. spouse may be eligible for survivor benefits if they reside in a country with a Totalization Agreement[3]. However, if the spouse is not a green card holder and lives outside the U.S. for six consecutive months or more, their Social Security payments could be suspended[3].
### Tax Implications
The tax implications of receiving Social Security benefits abroad can vary significantly. Generally, U.S. citizens are subject to U.S. federal tax on their worldwide income, including Social Security benefits. However, the tax treatment can differ based on the country of residence and any applicable tax treaties[3].
### Conclusion
While it might seem surprising that U.S. Social Security money is being sent to foreign countries, it is a result of the complex international agreements and rules in place. Understanding these rules is crucial for U.S. citizens living abroad and for non-U.S. spouses who may be eligible for benefits. As international relationships and agreements continue to evolve, it’s important to stay informed about how these changes might affect Social Security benefits.
