Social Security Pensions
Social Security Pensions: Which clients can receive them? How much can we receive? At what age?
Many Yisraeli’im ask, “Can I receive an American pension from social security while I live here in Israel?” Here is some very useful assistance :
How does the client know if he is eligible to receive social security pension payments?
A client has to work a certain number of years either as an employee of an American company, a self employed or LLC owner of an American business, or an Israeli atzmai osek patur or morshe and have a social security number to be eligible to receive social security pension benefits. Employees in Israel do not qualify for social security pension benefits from America.
A person can receive full social security benefits at age 66. If he wants to claim early, at age 62 he will receive 75% of his benefit amount, going on at 75% into the future. This percentage is graduated. For example, if a person waits until he is 70 years old, he will receive 132% of his pension benefit amount, going forward at 132% into the future.
What are the metrics?
A person who either has wages {employment} from America or earns self employment income from America, sole member LLC, or some partnership income in America {or earns atzmai osek patur or osek morshe income Israel} has what is called, “social security reportable income.” Social security reportable income carries along with it pensions. So if a client has any of these, he may qualify for social security pensions as long as he has a social security number.
In addition to this, there is a big bonus for people with children. People with children who have wages from America, self employment income from America, sole member LLC or some partnership income in America do not have to pay social security tax but they still may receive social security pension benefits. The qualifying factor is the amount of wages or American income. That’s the factor. Now, the child tax credit refunds offset social security tax so the client does not have to pay it but still receives the pension. But this credit offset cannot be used in conjunction with the IRS Form 2555, which is the ‘foreign earned income exclusion.’ So if the client is excluding his American income by using IRS Form 2555 he will never qualify for the child tax credit to offset his taxes and bring him a refund.
Clients with children should always watch out for this.
How is the pension amount calculated?
The client will expect to receive a percentage of his earnings {social security reportable income} which could also be the client’s net income (which is the income after the expenses if the client is self employed, sole proprietor or some partners with American issue, and also the atzmai osek patur or morshe here in Israel). This percentage is a complication calculation:
For example, a person who makes 4,000 USD every year in wages or net income {as above} will receive 1793 USD every year in pension payments at age 66.
The pension amount can be lower if the person doesn’t work for many years with American reported income because the calculation is averaged over 35 years of reportable income. Many Yisraeli’im do not report to America for 35 years. So it lowers their pension if the client does not report to America. For instance, if a person only reports 10 years to America the calculation will include 25 years of 0 earnings averaged in with the 10 years of reported earnings. This will bring the pension payment much lower if the client avoids reporting to America.
How many years a person works and reports to America will increase the client’s monthly pension payment. Once again, the social security pension benefit amount is a deep computation. Weinstein can tell you how much you will be receiving from social security pension. We do this for all our clients.
If a client works while the client is also receiving pension income from social security, the social security pension payments may be reduced as the client earns more and more money and tries to collect benefits at the same time. If a person is still earning money by either working and earning or through certain investments, it may be best to postpone the social security pension income because a postponed pension will be larger if the client waits to receive those pension payments until he is after age 66 or even more, as we see in the above. Whereas if the client takes the pension while he works, he may have lower pension payments as the amounts go down because of the work income during the same years the client is receiving pension income.
Extra benefits for a spouse, parents or children who don’t have social security reportable income:
A spouse who also worked and reported to America can receive her own social security pension. A husband and wife can each have their own pension income ! However, if a client who receives a social security pension has a wife, or even parents, or possibly children who did not work or reported very little or no earnings to America, that client can apply to receive a ‘social security spousal benefit’ or a ‘social security family benefit’ and this can be up to 150% or 180% of his own monthly pension amount.
So if a person receives 1,000 USD a month in social security pension and his wife did not earn that much money and report that much to America that client can apply for his own pension to increase to 1,500 USD a month to take on his wife’s pension who did not work.
The spouse who didn’t work adds 50% on top of the pension amount of the client, as long as she meets the requirements for social security. The beginning of this article explains that. The wife has to apply for her own social security pension benefits and then the social security administration will pay the family whichever is greater they will receive. Also if a client receives pension payments who has a child under 18 years old that child will give the client extra pension because the child is a dependent. You may have to apply for a social security number to do this.
