If you’re reading this, there is a strong chance that you are one of the many people who have divided their careers between France and the United States and are now wondering how to go about claiming your retirement benefits.
The Social Security Administration (SSA) and the French Sécurité Sociale are used to dealing with people who have spent their entire career in one or the other country and they can offer helpful advice about the best time to retire or how much you can expect to receive from Social Security.
But getting reliable retirement advice when dealing with careers split between both countries is far more difficult, as officials from both administrations are generally not aware of how retirement benefits work in the other country nor what is in the best interest of the soon-to-be retiree.
When faced with a French-American career, these officials will most often refer you to the U.S.-French Social Security Agreement and its totalization system. This international agreement is a double-edged sword as it can help your retirement benefits as much as it can harm them.
The 1987 Agreement on Social Security between the United States of America and the French Republic may help you increase your retirement benefits by allowing for periods of coverage which are credited under French laws to be taken into account for your Social Security retirement benefits. Conversely, periods of coverage completed under United States laws can also increase your French retirement benefits.
Through its totalization mechanism of covered working periods, the provisions of this agreement were clearly designed to protect workers whose careers were shared between both countries and ensure that they would not be penalized when they retired. However, these provisions can backfire and precipitate you into one of the major pitfalls of U.S.-French retirements: the Windfall Elimination Provision, also known as “WEP”.
The Windfall Elimination Provision is a piece of U.S. legislation passed in 1983 to prevent government and non-profit employees who were eligible for a pension based on earnings not covered by Social Security from receiving a “windfall” of Security Security benefits in addition to their pensions. The WEP applies a formula to reduce the Social Security benefits received by people in this situation.
While the WEP is not specifically targeted at people who have worked overseas, the fact that your French employer (or yourself if a freelancer) has not been withholding U.S. social security taxes from your salary during your time spent working in France is very likely to affect the calculation of your Social Security benefits… in a bad way!
So, in the end, is it worth it to use the U.S.-French Social Security Agreement?
Well … it depends! Upon your earnings, your age, when you want to retire and the time you have spent working in each country. Also, bear in mind that while the United States has only one Social Security Administration, France has no fewer than 35 compulsory retirement schemes. Depending on whether you worked as a salaried employee, freelancer, or as a doctor or an attorney, each “caisse” will apply its own rules and calculation methods.
For all these reasons, it is very important that you plan your French-American retirement ahead of time and determine the best strategy to optimize your retirement benefits. The advice of an independent counsel who has your best interest at heart may be helpful in plotting your course towards a comfortable retirement.
The most daunting part of the entire process of claiming a U.S.-French retirement is the following: once you start the process of claiming your retirement benefits, you can’t go back or make changes – even if you were not properly informed and aware of all your options. Even if you realize too late that your retirement will be significantly reduced because you made the wrong choices. There are no second chances.
Getting your retirement planning wrong can have dire consequences for your personal financial situation as a retiree as well as for your spouse, who may be entitled to all or part of your retirement benefits if she or he survives you.
This is a once-in-a-lifetime decision, so get it right!
Me Pierre Taponier
Attorney-at-Law, member of the New-York and Paris bars
Me Lucien Flament
Attorney-at-Law, member of the Paris bar, specialized in labor law