Even if you are still young (or feel young at heart), it’s essential to start thinking about your retirement provisions. Expat life can be expensive, as moving costs and similar expenses often add up. But this is no excuse to neglect building a “nest egg” for the days when you’d like to give up on working.
This section of our expat guide to the USA focuses on such financial matters: social security, pension plans, and taxation. The US has a well-established social security system that provides mainly for the elderly, disabled citizens, and families in need. When you start working in the US, a certain percentage of your gross income is directly withheld from your salary. Similarly, self-employed people need to pay a specific amount in social security tax. In this way, you earn social security credits; you’ll usually be eligible for benefits after about 10 years. However, social security in the US only provides a subsistence-level income. It prevents dire poverty among the aged, but it won’t allow you to retire in comfort. That’s what private pension schemes are for. We briefly explain the 401k, the most common type of company pension plan in the USA.