Retirement in the US: Social Security and Planning for Immigrants

Retiring in the United States is a long-term project that combines the public system, Social Security, with private instruments such as 401(k), IRAs, and taxable investment accounts. For immigrants who arrive mid-career, understanding these pieces from day one is what separates a comfortable retirement from a subsistence income. This guide explains, with data updated for 2026, how the system works, who is eligible, how to leverage international totalization agreements, and which strategies are most used by those who immigrate as adults.

How Social Security Works

Social Security is the public pillar of the American retirement system, administered by the Social Security Administration (SSA). Workers and employers contribute equally via FICA: 6.2% on wages up to the contribution ceiling (US$168,600 in 2024, adjusted annually by the average wage index). Self-employed individuals pay both sides via SECA, totaling 12.4%, with a partial deduction on federal income tax. The same payroll also funds the hospital portion of Medicare, via an additional 1.45% rate with no ceiling.

To be entitled to retirement benefits, you must accumulate 40 work credits, equivalent to approximately ten years of contributions. In 2026, each US$1,810 in covered earnings earns one credit, with a maximum of four credits per year. What matters is not the number of years but the total and inflation-adjusted average of the 35 highest-earning covered years.

Retirement Age and Its Impact on Benefits

Three age milestones determine the monthly benefit amount:

• Early retirement: starting at age 62, with a permanent reduction of up to 30% from the full benefit.
• Full Retirement Age (FRA): age 67 for everyone born in 1960 or later. At this milestone, the individual receives 100% of the calculated benefit.
• Delayed retirement: each year of waiting between FRA and age 70 adds 8% to the benefit, for a total of up to 24% above the full amount.

The difference between claiming at 62 and at 70 can exceed 75% in monthly value. For immigrants who began contributing late, delaying is often financially advantageous as long as other income sources are available in the interim.

Totalization Agreements and How to Use Them

The United States maintains totalization agreements with more than 30 countries to avoid double contributions and allow periods to be combined for eligibility purposes. Representative examples include agreements with Italy, South Korea, Portugal, the United Kingdom, Canada, and Spain. Under all of them, contribution periods in one country can be credited by the other to reach the minimum required credits.

In practice, an immigrant with five years of Social Security contributions and fifteen years in their home country’s pension system can use totalization to reach the 40 American credits, receiving from the SSA a benefit proportional to their covered earnings in the US. The agreement also resolves double contributions for international transfers: temporarily seconded workers continue contributing only in their home country, upon presentation of a certificate of coverage issued by the local social security authority or the SSA.

Benefits Beyond Retirement

The system covers four families of benefits:

• Retirement: old-age benefit based on contribution history.
• Disability (SSDI): inability to work, requiring recent contribution history.
• Survivors: death benefits for a spouse, minor children, and in certain cases dependent parents.
• Spousal: spouses without their own contribution history may receive up to 50% of the insured partner’s benefit.

Ex-spouses married for ten or more years are entitled to the spousal benefit regardless of whether the ex-partner is already receiving benefits, provided the divorce occurred at least two years prior.

Why Social Security Is Rarely Enough

The average benefit paid by the SSA is around US$1,900 per month, with a ceiling near US$4,870 for those who retire at FRA with maximum earnings history. In high-cost regions such as California, New York, and Massachusetts, that amount covers only basic expenses. The SSA itself notes that the program was designed to replace approximately 40% of pre-retirement income; the rest depends on private savings.

Private Pillars: 401(k) and IRAs

The 401(k) is an employer-sponsored plan. The worker chooses a percentage of their salary to contribute before tax (Traditional) or after tax (Roth), with the employer often matching part of the contribution, the well-known employer match. In 2026, the individual limit is US$23,500, with an additional catch-up contribution of US$7,500 starting at age 50.

IRAs (Individual Retirement Accounts) are individual accounts opened at any brokerage. A Traditional IRA allows a tax deduction on contributions with taxation on withdrawals; a Roth IRA inverts the logic: contributions are made with after-tax money, but withdrawals in retirement are tax-free. The annual limit in 2026 is US$7,000, with a US$1,000 catch-up above age 50.

For immigrants who intend to return to their home country, the Roth IRA is often superior because it avoids taxed withdrawals under US jurisdiction and simplifies tax treatment abroad.

Strategy for Those Who Arrive After Age 40

Immigrants who begin their US career in middle age face three simultaneous challenges: few Social Security credits, little time for private compounding, and a high cost of living. Some decisions reduce the impact:

1. Maximize the employer match: contributing below the level the company matches is equivalent to turning down part of your salary.
2. Prioritize Roth when your current rate is low: professionals in their early years are often in a lower marginal bracket than they will be at retirement.
3. Use catch-up contributions aggressively: from age 50, combining the 401(k) and IRA limits allows contributions of more than US$31,000 annually with tax advantages.
4. Activate the totalization agreement: request that periods from your home country be counted if you are close to the American minimum.
5. Delay claiming: each year after FRA permanently adds 8% to the Social Security benefit.

Considerations When Leaving the US and Double Taxation

When returning to their home country, US tax residents who maintain a 401(k) or IRA remain subject to American withdrawal rules. Withdrawals before age 59 1/2 incur a 10% penalty in addition to income tax. For residents in jurisdictions with a totalization agreement, benefits paid by Social Security are not subject to additional withholding at source under the terms of the agreement itself. Specific treaties to avoid double taxation vary: some countries have a full tax treaty with the US, while others are still negotiating.

Costly Mistakes for Immigrants

• Ignoring an available totalization agreement and dismissing home-country contributions as irrelevant.
• Withdrawing from a 401(k) early to fund consumption, losing compounding and paying a penalty.
• Claiming Social Security at 62 without analyzing life expectancy and actual cash flow needs.
• Concentrating all assets in the employer’s company stock via the 401(k), violating the principle of diversification.
• Failing to update beneficiaries after life events (marriage, divorce, birth of a child).

Tracking your contribution history is simple: the SSA maintains the my Social Security portal, where contributors can view accumulated credits, benefit projections, and pending corrections. Reviewing the statement annually is the most cost-effective way to identify errors before they become statute-barred.

Victoria Harper

Editor-in-Chief

Meet the author

Leading journalism and editorial content at Visto n’ Visa, Victoria helps make immigration topics clear, trustworthy, and easy to understand. Her focus is on delivering useful, human, and relevant content for people exploring new paths abroad.