# Social Sec and Working in UK



## shylynn (May 2, 2013)

Early in 2014 I will be eligible to collect my US Social Security, which I know I can do while living here in the UK. I have yet to decide if I am ready to totally retire, and am considering negotiating a reduction in hours when the time comes. I know when receiving social security benefits while in the states, there is a limit set on how much you can earn before your benefits are reduced. 

My question is, how does working in the UK change things, and if it does, is there a limit/cap on earnings here as well, and, what was it for this year? 

Thanks!


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## BBCWatcher (Dec 28, 2012)

You can start receiving Social Security benefits as early as age 62 and as late as age 70. The benefit amount increases the longer you wait. If you are healthier than average and don't need the money yet, I would wait.

The U.K. is one of the few Social Security treaty countries that taxes U.S. Social Security benefits (not the U.S.) if you're a resident of the U.K. So the answer depends on your U.K. situation (notably the personal allowances you qualify for), but as a basic principle you should view it like other income taxed by the U.K. at U.K. rates.


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## Bevdeforges (Nov 16, 2007)

I think what the OP is asking about a possible reduction in benefits based on working after you start receiving benefits. Check out this page of the SS Admin website Social Security Retirement Benefits - Online Application Information and scroll down to the link for Working While Receiving Benefits. That will give you the pdf of a very handy booklet about Social Security benefits that should include the answers to what you need.

One "catch" to living abroad is the possibility that the WEP (Windfall Elimination Provision) which will reduce the amount of your monthly payment if you are eligible for a "foreign government pension" of any type and in any amount. Do a search on the Social Security website for "WEP" and you'll find out more about this (but don't expect to actually understand the reduction - it's really complicated). 

You can ask for a Social Security statement online at the site, and that will include information about the amount you should receive, the maximum WEP reduction and information about how additional income affects your payment.
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

Yes, Bev, but working in the U.K. doesn't jeopardize any U.S. Social Security benefits. For U.K. residents U.S. Social Security retirement benefit taxability will be determined according to U.K. rules, not U.S. rules (per the U.S.-U.K. Social Security and tax treaties).

In the U.K. it looks like U.S. Social Security retirement benefits would be treated as ordinary income, so they'll be taxed at 0%, 20%, 40%, or 45% depending on which bracket that income falls into. (There's also a 10% rate strictly for income from savings, but it's very tough to qualify for that rate and it's not a rate that would apply to U.S. Social Security retirement benefits anyway. But for those that qualify for that 10% rate additional income could push them out of it.)

Said another way, U.S. Social Security retirement benefits would not be penalized any more nor any less than any other earned income in the U.K. So I think we can at least tentatively answer the original poster's question and say that she'll always keep at least 55 pence per pound of additional marginal income after starting to collect U.S. Social Security, so there's always going to be substantial incentive to generate more income at the margin.

That's also why I was alluding to the possibility of deferring to age 70. If that's a realistic option it could also well be more tax-efficient. Specifically the U.K. increases its personal allowances with age, so that tends to push individuals into lower tax brackets as they get older. That in turn means those higher deferred U.S. Social Security benefits could be taxed less. In other words, the U.K. tax rules might reward deferral of retirement benefits a bit more than the U.S. tax rules do.

Your point about the Windfall Elimination Provision (WEP) may be applicable. If the original poster starts receiving social security retirement benefits from another government (e.g. the U.K.) in addition to U.S. Social Security benefits, the WEP could kick in. If applicable that's another possible reason why continuing to work would make sense at least if the original poster enjoys the work.


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## Bevdeforges (Nov 16, 2007)

A number of years ago there was an issue of reduced benefits for earnings over and above your US SS benefits. Up to the full retirement age, I think they would reduce your benefits by $1 for every $2 you earned by working. For the overseas residents, they didn't want to fuss with exchange rates, so the rule was if you worked 40 hours in any month, that month's benefit was retracted. It had nothing to do with the tax system.

I think they've changed that all now, and whatever penalty there is for working while drawing US SS is done through the tax system, which is why I referred the OP to the Social Security website. 

The WEP kicks in whether or not you actually start drawing benefits from another system. It's triggered by your being *eligible* to draw benefits, whether or not you actually claim them and no matter how small a "pension" you draw. They'll take the WEP out of your monthly SS benefit from the start, even if you aren't yet eligible to draw your local benefit (due to age or service time). (Yeah, it's a huge PITA but there appears to be little or nothing you can do about it.)
Cheers,
Bev


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## shylynn (May 2, 2013)

I think it will be easier for me to answer your replies all at once. First thank you for the replies. Having lived in the US until just under 3 years ago I am well aware of the benefits of waiting as long as possible to start collecting my social security, which is why I am still undecided what I will be doing next year, especially since my husband is two years away from his UK retirement age.

As I work for a small company, and even if I wait a few years to retire I will not qualify for any UK pensions so those will not be an issue either. The issue I may have is I have calculated my estimated social security and I may be above the current personal allowance here in the UK, however since it is an estimate, and based on the exchange rate today, I am not going to worry about that until I am ready to collect.

However I do thank you for the information.

As to my original question. It is as Bev stated in her reply, I am trying to determine if SS benefits are reduced if I were to chose to collect and continue to work part time. I went to the SS link you provided Bev, and here is what the Social Security site says is now in place:

"Benefits are withheld for each month a beneficiary younger than
full retirement age works more than 45 hours outside the United States
in employment or self-employment not subject to U.S. Social Security
taxes. It does not matter how much was earned or how many hours were
worked each day."

So that answers my question.

Thanks again for your answers, they are most appreciated!


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## Bevdeforges (Nov 16, 2007)

Thank you for sharing that. I wasn't sure if the "hours worked" thing still was in effect. Now I know!
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

Careful. You have to look at the treaties, not the general case, to get the complete picture.


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## BBCWatcher (Dec 28, 2012)

To elaborate, Shylynn, your work in the U.K. may not qualify you for U.K. benefits, but the treaty provides that those contributions can be counted toward calculating your U.S. Social Security benefit. When you file for benefits be sure to let SSA know that you have U.K. contributions. Note that in some cases work can continue boosting benefits after you start collecting, so if that's your situation it's worth updating SSA periodically.

The work restriction you've found only applies if you are under "full retirement age" which is between 65 and 67 inclusive depending on your date of birth. If you're not starting benefits until that age or later -- you can wait as late as age 70 to increase your monthly benefit -- then work as much as you like.

If you must start collecting early then you must, but financially you're better off waiting if you can unless you're in comparatively poor health.


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## Bevdeforges (Nov 16, 2007)

As I understand it, the US SS may take into account the time worked outside the US - but only in the case where someone is shy of the 10 years needed to "vest" in the US system. And in any event, they will count only the time worked, not your earnings during that time.

The US Embassy in London has a Social Security office, if you have further questions. Though they mostly handle these things by e-mail (see the site - there is a "form" to fill out), I've found that the staff in the "remote" offices are generally more helpful than the folks back in the thick of it in the US. (There is also an IRS office at the London consulate.)
Cheers,
Bev


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