How Retiring Abroad Affects Social Security PaymentsPosted on October 3, 2016 by Glenn Ruffenach, as posted in The Wall Street Journal - September, 2016
Answers to questions about the benefits for expats, how to cash savings bonds and find a financial adviser.
If a retired individual moves abroad, can he or she still collect Social Security? What about Medicare?
Apparently you can take it with you, when it comes to Social Security payments. Retirees living outside the U.S. in most cases can have their Social Security payments deposited electronically in a bank here and transfer the funds to an account overseas. A second option: a direct deposit in a financial institution in a retiree's adopted country-as long as that country has a direct-deposit agreement with the U.S. (Go to socialsecurity.gov and search for: IDD Countries.)
A retiree who wishes to receive a paper check overseas can request an exemption from the Treasury Department to it's requirement (since 2011) that Social Security checks be deposited electronically.
Note: We say "in most cases" above because Treasury regulations prohibit Social Security payments to U.S. citizens in North Korea or Cuba, as well as several areas that were once part of the Soviet Union. (Think: Azerbaijan, Tajikistan, etc.) None of these appear to be retirement hot spots, however.
As for Medicare, the program works only in the U.S., with limited exceptions. (See medicare.gov and search for: coverage outside the U.S.) A retiree living overseas would need to consider other options, such as buying private insurance before moving, or enrolling (if possible) in health coverage abroad.
Some might decide they still want to keep-and pay for-Medicare coverage, thus preserving the option of U.S.-based medical care even as they continue to be based abroad. In that case, Medicare Part A, which covers hospital bills, is free for most individuals age 65-plus. But Medicare Part B, which covers doctors' services, costs between $104.90 and $389.80 a month, depending on one's income. If a retiree plans to settle overseas, it might make sense to drop (or not enroll in) Part B.
If a retiree returns to the U.S. and wishes to start Part B coverage, the premium could be 10% higher for each 12-month period that person could have been enrolled but wasn't.
In a response to a recent question about financial advisers, you recommended "meeting with a financial planner who charges by the hour." My question: How do I find such a person? I have called quite a few financial planners and all of them will work only for a percent of assets under management.
Start with Garrett Planning Network, whose members specialize in hourly advice. Online service LearnVest.com has affordable planning packages and lets you speak with an adviser. You can also try the National Association of Personal Financial Advisors and the Financial Planning Association. Both groups allow you to search for advisers and financial planners in your area, and you can ask whether they accept hourly clients.
I just came across several Series EE savings bonds purchased in 1998 and 1999 by my now-deceased stepmother. All are payable-on-death to me. Must I cash them in now, or can I retain them and continue to accumulate interest? If I cash them in, must I contact the Federal Reserve directly, or can my local bank handle this matter? Are there online forms to complete to cash these bonds?
You don't need to cash in. Your bonds are still earning interest-and will continue to do so until 2028 (for bonds purchased in 1998) and 2029 (for bonds purchased in 1999). The best thing to do: Take a step back and avoid the all-too-common mistakes that investors make when dealing with savings bonds.
The first: cashing in bonds arbitrarily, says Jackie Brahney, marketing director of SavingsBonds.com, a website for savings-bond holders. "People don't understand what their bonds are actually worth, what they're earning, or when and how interest is paid," she says.
Let's say your stepmother purchased a paper EE bond (vs. an electronic bond) with a face value of $500 in July 1998. At the time, she paid $250. (That's how paper purchases worked then; a buyer paid half the face value, and the bond began earning interest on the purchase price.) Today, that bond is worth $508 and is earning 1.31%, according to TreasuryDirect.gov, (an excellent source of information about savings bonds). By comparison, money-market accounts nationwide currently are returning an average of 0.11%, according to Bankrate.com.
Every six months, the Treasury Department adjusts the interest rate on this particular savings bond (as it does with all EE bonds bought from May 1997 through April 2005); and twice a year, all the interest that the bond has earned in the previous six months is added to the value of the bond. If you cash in just a day or two before that six-month period is up, you miss six months of interest.
The second big mistake: failing to understand the tax consequences of redeeming savings bonds. When you cash in, you pay federal income tax (but not state or local) on the interest the bond has earned. If you redeem a large amount in a single calendar year, you could end up in a higher tax bracket or, if you're enrolled in Medicare, paying higher premiums for Medicare Part B.
As for the mechanics of cashing in, many banks will redeem paper savings bonds for their customers. (Again, make sure you know the value of the bonds before you cash them in.) You will need a valid ID and, in this case, a death certificate. Electronic savings bonds can be redeemed at TreasuryDirect.gov.
Mr. Ruffenach is a former reporter and editor for The Wall Street Journal and co-author of The Wall Street Journal Complete Retirement Guidebook. His column examines financial issues for those thinking about, planning and living their retirement. We welcome your questions and comments at firstname.lastname@example.org.