Social security and pensions in the USA

The pension system in the USA comprises the state pension scheme known as Social Security, which is administered by the Old Age, Survivors, and Disability Insurance (OASDI) pension insurance provider. This system is financed by contributions from working people, known as Social Security taxes. In addition to the state pension, company and private pension plans, such as the 401(k) plan and Individual Retirement Accounts (IRAs), play an important role.

Pension entitlements in the USA are determined using credits based on income. A maximum of four credits can be accumulated per year, and to receive a pension you need at least 40 credits, which corresponds to around ten years of contributions. The retirement age is gradually being increased from 65 to 67, with earlier or later retirement subject to deductions or surcharges.

The state pension scheme, which is administered by the Social Security Administration (SSA), includes old-age pensions, widows' and orphans' pensions, disability pensions and support programs for the disabled and needy. Employees and employers each pay 6.2% of their gross salary into the pension fund, while the self-employed pay 12.4%.

For Germans who have worked in both the USA and Germany, a social security agreement makes it easier for insurance periods from both countries to be credited. This makes it possible to receive pension payments regardless of which country you live in. Pension applications can be submitted to the respective national social security office, and services such as Wise simplify payment processing and currency exchange.

In addition to contributory pension insurance, social pensions provide a guaranteed source of income for people who are not adequately covered and help to combat poverty in old age and reduce social inequalities. Various countries, including Chile, Ecuador, Jamaica and Mexico, have reformed their social pension programs to ensure income security for older people and reduce poverty in old age.

Careful pension planning is essential for emigrants planning to move to the USA. It is important to find out about the differences between the German and US pension systems at an early stage. While the German system is heavily influenced by statutory pension insurance, the US system offers more flexibility through company and private pension plans. Emigrants should check to what extent they can continue existing pension contracts from Germany and what adjustments are necessary to optimize pension entitlements in both countries. Comprehensive advice from a financial or pension expert who is familiar with both systems can help to make the best decisions and ensure financial security in retirement. Emigrants should also consider the tax implications of both countries to avoid any unpleasant surprises.

In summary, the US pension system offers comprehensive protection in old age through a combination of state, company and private pensions as well as international agreements and social pension programs. If you are planning to emigrate to the USA or are considering a move to the USA, it is important to find out about pension planning and entitlements at an early stage.