# Applying for SS pension while waiting for CLN



## iota2014 (Jul 30, 2015)

In beween renouncing one's US citizenship and receiving documentation (Certificate of Lost Nationality) there's a six-month limbo when different US Government Departments seem to have different opinions on whether one is still a US citizen or not.

The Treasury says no. The Dept of State says yes. Anyone know what view the SSA officially takes?

I renounced a few weeks ago and am waiting for the CLN, so I don't know if I'm an alien or still a dual, for SS purposes. The FBU also seems unsure, which is not surprising as it may not be a situation that commonly arises. It would be very helpful if I could locate an official ruling I could point them to. Any suggestions would be much appreciated.


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## iota2014 (Jul 30, 2015)

Speedy response from FBU: claim as US citizen and then update it after CLN arrives.


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## iota2014 (Jul 30, 2015)

Hmm. Not sure why this has been moved to "Expats living in America". Very few renunciants spend their CLN limbo in the US, I should think.

Never mind.


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## Bevdeforges (Nov 16, 2007)

Not sure where this was moved from (and no, I didn't move it). But I suppose the US forum is as relevant as any other one. (Not really a "tax" issue.)

I think the only reason your citizenship would be an issue with SSA would be if you were currently receiving benefits. In any event, I'm pretty sure this is one of those "life events" that they expect you to report to the SSA and let them wrestle with the consequences for a bit.
Cheers,
Bev


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## iota2014 (Jul 30, 2015)

Bevdeforges said:


> Not sure where this was moved from (and no, I didn't move it). But I suppose the US forum is as relevant as any other one. (Not really a "tax" issue.)


Tax? No. I posted it in the "Expat in Britain" forum. I don't think a post about CLN limbo is likely to be of interest to expats living in America. But it's not important.



> I think the only reason your citizenship would be an issue with SSA would be if you were currently receiving benefits.


Or applying, as I am.


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## BBCWatcher (Dec 28, 2012)

Citizenship status could also be an issue if you're self-employed, living in a country that does not have a social security treaty with the United States, and subject to the Self-Employment Tax (or not). However, that'd be up to the IRS presumably since the IRS is responsible for collection of the Self-Employment Tax.

CAUTION: If you are _relinquishing_ U.S. citizenship (in particular), and you want that relinquishment to go through and be documented (i.e. to relinquish successfully), then you have to be careful not to act as a U.S. citizen. Applying for U.S. benefits as a U.S. citizen is acting like a U.S. citizen.


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## BBCWatcher (Dec 28, 2012)

I should add the corollary: relinquishment or renunciation of U.S. citizenship means that it's no longer possible to continue contributing to the U.S. Social Security system. That means retirement benefits may not vest and, at least, they cannot accrue further. Disability and survivor coverages will terminate after a couple years without contributions. In some cases, depending on the other citizenship(s), all Social Security benefits are lost (since Social Security can pay benefits only to citizens of most other countries but not all). If benefits are still payable then 25.5% of your total Social Security benefit will be withheld for taxes unless a tax treaty says otherwise. And, if it's not obvious, Medicare and SSI benefits no longer apply.

Given the loss of disability and survivors coverages in particular, it's often prudent to replace those coverages with alternative, quality insurance arrangements to the extent possible. You should also factor any after-tax reduction of these benefits into your retirement planning.


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## iota2014 (Jul 30, 2015)

All very useful information but unfortunately this thread has been moved to exactly the least appropriate forum, as expats living in America are unlikely to be US citizens embarking on relinquishment or renunciation of US citizenship.


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## iota2014 (Jul 30, 2015)

iota2014 said:


> All very useful information but unfortunately this thread has been moved to exactly the least appropriate forum, as expats living in America are unlikely to be US citizens embarking on relinquishment or renunciation of US citizenship.


Though come to think of it, I suppose some of it may be relevant for Green Card holders handing back the card.


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## Bevdeforges (Nov 16, 2007)

If you like, we can move this over to the Expat Tax section, since that is where the discussions are on renunciation and its consequences.

The one big "tax" consequence of applying for US SS as a non-citizen is that you will be subject to the 30% withholding condition. Various sources mention that as a "30% withholding tax" or simply a withholding (which implies you could file an NR form and get back the difference with what you actually owe). 
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

It's actually a 25.5% withholding because it's 30% of 85% of the benefit. No, I don't know why 15% of the benefit is exempt from withholding.

I'm not sure you can get the withholding back, but even if you can get at least some of it back you lose the interest value on that withholding, and you take some exchange rate risk as well. Moreover, the IRS does not pay you any interest on your refund. Even worse, the IRS cannot pay refunds to foreign bank accounts, unlike the Social Security Administration which can in many cases. So you might take another hit having to pay a non-U.S. bank fee to deposit a U.S. check from the IRS. In short, withholding isn't terrific.

Another negative that occurs to me is that, once you end Self-Employment Tax liability, you also could increase your Windfall Elimination Provision (WEP) and thus reduce your future benefits that way. For example, let's suppose you're working in Singapore and you contribute to Singapore's Central Provident Fund (CPF), their social security system. But suppose you also pay the SE Tax since Singapore and the U.S. don't have a social security treaty. You renounce U.S. citizenship, and thus you stop paying the SE Tax. The portion of your CPF benefits attributable to the time when you didn't pay the SE Tax then counts toward the WEP calculation in reducing your U.S. benefits.


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## Bevdeforges (Nov 16, 2007)

The effect on the WEP may be speculation on your part. The WEP calculation is pretty complex (i.e. "bizarre") and there appears to be some limitation on the amount they can take from your pension for WEP based on what you actually receive as a "foreign pension benefit." (At least one website mentioned this.) Which is good, because my French pension is going to be miniscule. But I guess we'll find out in a couple years when I apply for benefits.

In any event, if the OP is applying for benefits, it means that there is a good chance they aren't considering further contributions into a foreign pension system. (And those would have "got" them, citizen or not.)
Cheers,
Bev


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## iota2014 (Jul 30, 2015)

Neither the WEP nor withholding apply in this case, as it's a totalization benefit.


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## iota2014 (Jul 30, 2015)

Bevdeforges said:


> The effect on the WEP may be speculation on your part. The WEP calculation is pretty complex (i.e. "bizarre") and there appears to be some limitation on the amount they can take from your pension for WEP based on what you actually receive as a "foreign pension benefit." (At least one website mentioned this.) Which is good, because my French pension is going to be miniscule. But I guess we'll find out in a couple years when I apply for benefits.


There's a downloadable calculator at https://www.ssa.gov/OACT/anypia/anypia.html which takes WEP into account and has been reported to give pretty accurate results. I haven't used it myself. If I were going to try it, then given my druthers I'd use the MacOS version as it appears that's the only version being kept properly OS-upgraded.



> In any event, if the OP is applying for benefits, it means that there is a good chance they aren't considering further contributions into a foreign pension system.


Indeed they are not, as they are age 75 which makes it a poor investment.


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## iota2014 (Jul 30, 2015)

iota2014 said:


> Neither the WEP nor withholding apply in this case, as it's a totalization benefit.


In case anyone may in future be searching for more information, see (for withholding): 


> U.S. citizens who are residents of the following countries are exempt from U.S. tax on their benefits.
> Canada.
> 
> Egypt.
> ...


(From Publication 915, https://www.irs.gov/publications/p915/ar02.html)

And (for the WEP in relation to totalization benefits):


> In general, for purposes of the Windfall Elimination Provision (WEP), a foreign pension based on employment not covered by U.S. Social Security is treated the same as any other pension based on noncovered employment. For Totalization benefits payable for months prior to January 1995, special rules are used to determine whether a foreign pension is considered a pension based on noncovered employment. Since the WEP does not apply in computing Totalization benefits for months after December 1994, these special rules are relevant only if Totalization benefits are payable for months before January 1995.
> [..]
> When a worker is entitled to a U.S. Totalization benefit payable for months before January 1995 and a pension from a Totalization agreement country (i.e., a pension based on work covered by the social security system of that country), the foreign pension is considered to be based on U.S. covered work. As a result, entitlement to a pension (government sponsored or private) from an agreement country will not cause the WEP to apply in the computation of a U.S. Totalization benefit payable for months before January 1995.
> This policy applies regardless of which agreement country is paying the pension (i.e., it does not have to be the country whose coverage was used to establish the number holder’s (NH’s) entitlement to the U.S. Totalization benefit).
> If the NH is insured based on U.S. coverage alone, a pension from an agreement country is considered a pension based on noncovered work and may trigger the WEP for benefits payable for months prior to January 1995. For benefits payable after December 1994, a foreign pension may trigger the WEP only if the NH is insured based on U.S. coverage alone and the foreign pension is not based on the Totalization agreement with the United States. (See GN 01701.310 for a discussion of this provision.)


(https://secure.ssa.gov/poms.nsf/lnx/0201701301)


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## BBCWatcher (Dec 28, 2012)

Bevdeforges said:


> The effect on the WEP may be speculation on your part.


Not really. The Windfall Elimination Provision is very real. Its application and effects are situational, but the WEP would apply in the scenario I described.



iota2014 said:


> Neither the WEP nor withholding apply in this case, as it's a totalization benefit.


I'm not sure what you meant here, Iota2014.

I should say that I'm a _little_ concerned Congress might eventually yank U.S. Social Security benefits from those who renounce or relinquish U.S. citizenship. Congress and the President practically overnight, in this year's budget agreement, changed the rules concerning "file and suspend" claims for spousal benefits to make benefits less generous in those situations. There was also an effort to withhold benefits from "fugitive felons," though I don't think that provision passed. So who knows what the future might bring.


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## iota2014 (Jul 30, 2015)

BBCWatcher said:


> I'm not sure what you meant here, Iota2014.


See https://secure.ssa.gov/poms.nsf/lnx/0201701301



> I should say that I'm a _little_ concerned Congress might eventually yank U.S. Social Security benefits from those who renounce or relinquish U.S. citizenship. Congress and the President practically overnight, in this year's budget agreement, changed the rules concerning "file and suspend" claims for spousal benefits to make benefits less generous in those situations. There was also an effort to withhold benefits from "fugitive felons," though I don't think that provision passed. So who knows what the future might bring.


Thanks for your kind concern  but not needed, as 

a) I'm not a fugitive felon 

b) "yanking" the exemption of totalization benefits from the WEP wouldn't be straightforward given that the logic is that under totalization agreements work covered by either country's SS is treated as covered by both; and the withholding exemption is a reciprocal tax treaty benefit - yanking here could cost a politician a vote or two. 

c) it's not a significant amount, being based on two or three years work back in the sixties. I see it as a partial rebate on the $2350 I paid to renounce - if I can manage to stay alive and keep collecting for six or seven years I may break even.


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## iota2014 (Jul 30, 2015)

iota2014 said:


> In case anyone may in future be searching for more information, see (for withholding):
> 
> (From Publication 915, https://www.irs.gov/publications/p915/ar02.html)


Apologies, I quoted the wrong bit. Should have quoted this section:


> Under tax treaties with the following countries, residents of these countries are exempt from U.S. tax on their benefits.
> Canada.
> 
> Egypt.
> ...


There is a SSA "tool" to see the effect of these rules in a given situation. See https://www.ssa.gov/international/AlienTax.html


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## Bevdeforges (Nov 16, 2007)

I've seen that calculator thing to figure out your WEP penalty - however IIRC, it involved keying in your entire benefit history (which otherwise is available fully loaded online). Seemed a rather long and pointless exercise that I elected to put off to another day.... which hasn't arrived yet.
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

No, I meant that Congress just might decide to terminate _all_ U.S. benefits for those who renounce or relinquish U.S. citizenship, including Social Security. I don't know how big that political risk is, but it's not zero.


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## iota2014 (Jul 30, 2015)

Accidental duplicate post - apologies


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## iota2014 (Jul 30, 2015)

Bevdeforges said:


> I've seen that calculator thing to figure out your WEP penalty - however IIRC, it involved keying in your entire benefit history (which otherwise is available fully loaded online). Seemed a rather long and pointless exercise that I elected to put off to another day.... which hasn't arrived yet.
> Cheers,
> Bev


A thought - since you say your French pension will be small, might a Totalization benefit give you an improvement?


> Under the [totalization] agreement, France will compute an old-age pension based on French credits alone as well as a prorated benefit based on U.S. and French credits, and then pay whichever is greater.


https://www.ssa.gov/international/Agreement_Pamphlets/france.html

And if so, your French pension would be a totalisation benefit and might not trigger the WEP on your US SS. I'm only speculating, on the basis of what I've learned about this stuff very recently. Might be worth checking out, might not.


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## Bevdeforges (Nov 16, 2007)

Thanks for the idea, and I will look into it. The problem (or so I suspect) is that the only reason I qualify for any sort of French pension is if they count my US work years (credit for having worked, but not for the salary I had during those years). On French credits alone, I don't come up to the requirements for a "half pension."

But I'll check it out when the time comes a bit nearer. Thanks for mentioning it.
Cheers,
Bev


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## expatwien (Oct 17, 2015)

Perhaps some better news from the same web site
https://www.ssa.gov/international/Agreement_Pamphlets/france.html
---
A French Pension May Affect Your U.S. Benefit
If you qualify for social security benefits from both the United States and France and you did not need the agreement to qualify for either benefit, U.S. law may reduce the amount of your U.S. benefit.

This is a result of a provision in U.S. law that can affect the way the United States computes your benefit, if you also receive a pension based on work not covered by U.S. Social Security. For more information, visit our website at www.socialsecurity.gov, and get a copy of Windfall Elimination Provision (Publication No. 05-10045) or call our toll-free number, 1-800-772-1213. If you are outside the United States, you may write to us at the address in the "For More Information" section.
---
This implies (but doesn't explicitly state) that US law won't reduce your SS benefit.

Another point is that if you have 30 years of 'Substantial Earnings' in the US, you are exempt from WEP, and it's prorated between 20 years (maximum WEP) and 30 years (no WEP).

See https://www.ssa.gov/pubs/EN-05-10045.pdf

The downloadable calculator is a very good idea to look at. You can save your input data, and do several 'what-if' calculations, so the typing only needs to be done once. The calculator clarifies several points which the online documentation leaves unclear.


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## iota2014 (Jul 30, 2015)

My understanding is that it depends firstly on whether the French pension is a Totalization benefit (i.e. years from both countries have to be used to be eligible for the French pension). If yes, then it's possible the SS pension will not be subject to the WEP, provided there are no other non-SS earnings (such as another foreign pension, or US university earnings,). 

If the French pension is not a Totalization benefit (i.e. no need to use any US workyears to qualify), then (according to my understanding, which is foggy) it will trigger the WEP on the SS pension.

There's an explanation of the logic at https://secure.ssa.gov/poms.nsf/lnx/0201701301


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## expatwien (Oct 17, 2015)

That's explained better a few pages down from what you quoted:
https://secure.ssa.gov/poms.nsf/lnx/0201701310
---
A. Introduction
Beginning January 1995, a foreign pension that is based on a Totalization agreement with the United States will not cause the WEP to apply in the computation of a non-Totalization U.S. benefit. This section provides instructions for determining whether a foreign pension is based on a Totalization agreement with the United States.

B. Policy
A foreign pension is “based on a Totalization agreement with the United States” if entitlement to the pension is established as a result of the Totalization agreement between the United States and that country. A foreign pension is not based on the agreement if the beneficiary met the normal entitlement requirements of the other country’s laws and did not rely on the agreement to establish entitlement. The decision as to whether the foreign pension is based on the agreement is made as of the first month the beneficiary is concurrently entitled to the foreign pension and a U.S. benefit.
---
So it appears that Bev has no problem with WEP, since she stated she needs her US years to qualify for a French pension.

And yes, WEP will be triggered if the US years aren't needed to qualify for a foreign pension. In the case of France, this is covered by my previous link, but the principle generally holds.


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## iota2014 (Jul 30, 2015)

I daresay you may be right. The snag is that it apparently only takes one quarter's work to qualify under the French system. Presumably that's why the French Totalization Agreement allows for US quarters to be used if that would give a better outcome. But according to the WEP rules that wouldn't be a Totalization benefit, since the claimant would have been entitled to _some_ French benefit on French quarters alone.

But it may well be deemed to be a Totalization benefit, as it's a specific provision of the Agreement.


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## iota2014 (Jul 30, 2015)

If not, it might be worth opting for the French-only pension, even if lower, if that would avoid triggering the WEP on the SS pension. 

If one's allowed to choose.


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## Bevdeforges (Nov 16, 2007)

expatwien said:


> So it appears that Bev has no problem with WEP, since she stated she needs her US years to qualify for a French pension.
> 
> And yes, WEP will be triggered if the US years aren't needed to qualify for a foreign pension. In the case of France, this is covered by my previous link, but the principle generally holds.


I'd hardly say I have "no problem" with WEP - but yeah, since I need to rely on my US working years to qualify for a French pension, and I don't have anything like the 30 years necessary to exempt from the WEP, I think I just have to accept that's how things turn out.
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

iota2014 said:


> If not, it might be worth opting for the French-only pension, even if lower, if that would avoid triggering the WEP on the SS pension.


Surely that's _never_ a good idea. The WEP if it applies never reduces your U.S. Social Security benefit to zero. At most it reduces your benefit by 50%. But 50% is still always better than 0%, so why would you ever not collect the benefit you're entitled to collect?

WEP does mean it might be a good idea to start collecting the foreign benefit first then wait up until as late as age 70 (but no later) to collect the U.S. benefit (in order to get a higher monthly benefit). But "it depends." If you're in poor health, for example, then it's probably best to start benefits earlier. And of course if you need the benefits you may not be able to delay.

By the way, Professor Laurence Kotlikoff has developed an online Social Security calculator which is generally regarded as the "gold standard" in helping you decide how to optimize your Social Security benefits. It's not free, but I would recommend checking it out since it's probably money well spent.


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## iota2014 (Jul 30, 2015)

BBCWatcher said:


> Surely that's _never_ a good idea. The WEP if it applies never reduces your U.S. Social Security benefit to zero. At most it reduces your benefit by 50%. But 50% is still always better than 0%, so why would you ever not collect the benefit you're entitled to collect?


Because, if the higher French pension is not classed as a Totalization benefit, it will trigger WEP on the SS pension. In which case opting for a lower French pension (which would undoubtedly be classed as a Totalization benefit) would be a way of avoiding the WEP and collecting 100% of the SS pension. The total of (100% SS pension plus the lower French pension) might well be greater than the total of (WEPped SS pension plus the higher French pension) - depending, of course, on the numbers.

But it's a moot point if (a) the claimant isn't offered a choice, or (b) both the higher and the lower French pensions are classed as Totalization benefits.


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## iota2014 (Jul 30, 2015)

iota2014 said:


> If not, it might be worth opting for the French-only pension, even if lower, if that would avoid triggering the WEP on the SS pension.
> 
> If one's allowed to choose.


Sloppily expressed.  

Should have said something like "it might be worth opting for the lower French pension, calculated using only French quarters..."


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## BBCWatcher (Dec 28, 2012)

Right. In all cases it makes sense to collect entitled benefits from U.S. Social Security (at least by age 70), WEP or no WEP. Decisions on the French side might influence whether WEP applies or not -- and of course how big it is if it does.

Note that there is no WEP if you're not yet collecting U.S. Social Security. A few foreign systems, such as Singapore's, give you the option to "front load" benefits or even take a lump sum. That could make a lot of sense. Assuming good health, the basic idea is you'd defer your U.S. Social Security benefit until later (or as late as age 70) and maximize ("front load") collection from the foreign system before then. Once you start collecting U.S. benefits the WEP is then calculated on a lower or possibly even zero foreign benefit from that age. As far as I can tell this optimization technique is fully consistent with the rules.


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## Bevdeforges (Nov 16, 2007)

iota2014 said:


> Sloppily expressed.
> 
> Should have said something like "it might be worth opting for the lower French pension, calculated using only French quarters..."


I don't believe you would have that option if you have both US and French quarters available. They pretty much ask/require you to account for your employment history in full. And there are other reasons along the way that you might want to have your full employment history in all countries where you might have worked considered. (Main one is unemployment past age 60.)
Cheers,
Bev


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## iota2014 (Jul 30, 2015)

BBCWatcher said:


> Right. In all cases it makes sense to collect entitled benefits from U.S. Social Security (at least by age 70), WEP or no WEP.


Depends on your outlook. I'd say it makes sense to try to maximize your *contributions* to the society you regard as your home, and maximize your *collections* from any other (first world) country where you may have worked. And definitely not set out to shape your life with the aim of maximizing your pension.

There's more to life than dollars and doughnuts, you know.


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## iota2014 (Jul 30, 2015)

Bevdeforges said:


> I don't believe you would have that option if you have both US and French quarters available. They pretty much ask/require you to account for your employment history in full. And there are other reasons along the way that you might want to have your full employment history in all countries where you might have worked considered. (Main one is unemployment past age 60.)
> Cheers,
> Bev


Indeed. And the WEP rules are in any event subject to change, which might be retroactive. If the formula is eventually changed to take into account real-life average noncovered-employment earnings, as the SSA has proposed (http://ssab.gov/Portals/0/Reports/WEP_Position_Paper_2015.pdf?ver=2015-10-02-104201-183), the distortions caused by the WEP in an international context should be reduced.


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## BBCWatcher (Dec 28, 2012)

iota2014 said:


> Depends on your outlook.


I'm not following you. I wrote that "In all cases it makes sense to collect entitled benefits from U.S. Social Security...." You apparently disagree with some point I _didn't_ make.

Or were you advocating that some individuals entitled to U.S. Social Security benefits should _purely altruistically_ waive their entitled benefits in order to reduce U.S. government outlays, to the benefit of all of U.S. civil society? If so, I can applaud that pure altruism, and then maybe I would add the words "personal financial" between the words "it" and "makes."


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## iota2014 (Jul 30, 2015)

Certainly. It would absolutely make sense (in my view) for a person who was devoted to the US and wanting to contribute to the national wellbeing to want to maximize contributions to the US system and collections from others. For example, you might be in a position to avoid the WEP deduction but decide to forego it - while at the same time making the most of any opportunities to optimize your credit in foreign first-world SS systems.

Just as I would choose, if the opportunity arose, to maximize my contributions to the UK system and maximize my collections from the US.

Perfectly rational, in my view. And not altruism but a sound investment in one's own future comfort and happiness, and that of one's fellow citizens.


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## BBCWatcher (Dec 28, 2012)

Where did I mention contribution behaviors in that statement?

If your parent drags you to the United States, you work within two calendar years while in high school, and on your 18th birthday you hop on a plane to France and work there for the rest of your life, you're (most likely) entitled to a U.S. Social Security retirement benefit, and your spouse a spousal benefit. In every case it makes personal financial sense to collect entitled benefits from U.S. Social Security by age 70.

In other words, most people in the real world don't get to choose contribution patterns, at least not to any significant degree. (It would be nice if I could just double my salary tomorrow, wouldn't it?) They simply end up with entitled benefits or not. So I'm not following you, especially since I didn't even refer to contribution behaviors.


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