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Social Security Considerations for U.S. Citizens Living Abroad
Author: Joel Baretto, CFP®
June 16, 2025
U.S. expatriates often encounter complex financial issues while living abroad. Navigating Social Security benefits is no different. Here are four key challenges to be aware of when preparing for retirement as an American living overseas.
1. Social Security Tax Obligations
Since Social Security benefits are considered U.S.-sourced income, they are not eligible for the Foreign Earned Income Exclusion (FEIE), which only applies to income earned abroad. Once you start receiving benefits, up to 85% may be taxed at standard income tax rates.
2. Dual Coverage and Totalization Agreements
If you’ve spent part of your career working abroad and have also contributed to the U.S. Social Security system for at least 40 quarters (10 years), you may qualify for both a foreign pension and U.S. Social Security benefits. However, it’s crucial to understand how totalization agreements could affect your eligibility before claiming benefits.
As of 2025, the U.S. has totalization agreements with 30 countries. These agreements serve two main purposes: to prevent dual taxation of Social Security contributions and to help workers who have split their careers between the U.S. and another country qualify for retirement benefits.
If you haven’t met the 40-quarter requirement in the U.S. alone but have contributed to a foreign equivalent in a partner country, these agreements may allow you to qualify for U.S. benefits. Without such an agreement, you risk being ineligible for retirement benefits from both countries—even if you paid into both systems—due to not meeting the independent qualification thresholds.
3. Currency Risk and Social Security Payments
Although Social Security benefits can be disbursed in foreign currencies, they are calculated in U.S. dollars. This exposes recipients to exchange rate fluctuations, which can significantly affect purchasing power abroad. As a result, monthly payment amounts may vary and be less predictable. Working with a cross-border wealth advisor can help you anticipate currency volatility and implement strategies to protect your retirement income.
4. Spousal Benefits for Non-U.S. Citizens
Foreign spouses may be eligible to receive spousal or survivor benefits based on their partner’s U.S. Social Security contributions, depending on specific eligibility requirements.
Navigating Social Security as a U.S. expat can be complex, but you don’t have to do it alone. At Abacus Wealth International, we specialize in serving Americans living overseas and cross-border families. Our fiduciary wealth managers help you optimize your financial strategy, avoid costly missteps, and confidently manage the intricacies of multi-jurisdictional regulatory systems. From managing currency risk to global investment diversification, we take a comprehensive approach to ensure your financial plan aligns with your long-term goals.
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