Staff Reporter
By Peter Dougherty of Bissan Wealth Management
IMAGINE if the social security administration of Spain hired a travel agency to offer its ‘retirement experience’ as a travel destination. What might their travel brochure look like?
Name: “All-inclusive Retirement Resort” or “Set-it-and-forget-it Retirement Plan”
Slogan: “Relax, we’ve got you covered!”
It appears to have worked:
The percentage of Spanish retirees who rely on social security payments for 50% or more of their income is much higher than in the US or the UK:
What other features might Spain’s retirement vacation package highlight? First and foremost, that public healthcare is included. However, it should also mention what the trip does not include: neither long-term sustainability (due to its growing costs) nor a strong private pension sector.
The social security administrator of United States would likely advertise a different ‘retirement experience’:
Name: “Second Act Ski Package”
Slogan: “Our Ski Lift takes you only as high as your contributions”
For high earners who contributed consistently throughout their lifetime, the maximum monthly pension is greater than the maximum in Spain or the UK. Those skiers get taken to the top of the ski slope. Yet each year only 6% of workers contributing to U.S. social security reach the top income level and not all maintain that level of earnings long enough to qualify for the maximum benefit. Thus, the actual percentage of retirees collecting the top-tier benefit is significantly less than 6%.
In retirement, most Americans need to supplement their social security payments from other sources. That is why several additional retirement financing vehicles are widely used (e.g., multiple types of 401(k)s and IRAs).
What happens if an American retires in Spain? Does their ski package go downhill, and not in a good way?
The news is good: the US social security system considers Spain an approved country, so their payments should continue without interruption. In addition, an American who worked in both countries but doesn’t qualify for benefits in one, can combine their work history to qualify. Also, U.S. citizens working in Spain may be exempt from paying into Spain’s social security system for up to five years, if covered by U.S. social security.
And the news keeps getting better. From 1983 until early this year, U.S. social security payments were reduced for Americans who also received social security from Spain — or any another country. It was called the Windfall Elimination Provision (WEP). Fortunately, for Americans in Spain who might fit that category, the WEP was completely repealed in 2025.
The “retirement experience” offered by the travel agency for the social security administrator of the UK would look very different from that of either Spain or the US:
Name: “Golden Years Bus Tour”
Slogan: “The Carbon-Copy Coach”
The UK brochure might also mention that you can count on flat-rate, reliable payments that are adjusted upward annually. However, the bus only travels so far, pensioners typically supplement this income to arrive at their monthly budget destination.
What happens if a UK citizen retires in Spain? Does the tour continue but with flamenco playing on the bus radio?
Yes, the tour can continue on its way. UK state pensions can be received in Spain. And you should also be entitled to public healthcare in Spain paid for by the UK if you receive a UK state pension.
The road may or may not be smooth, though, as it relates to receiving private pensions. Some UK providers have their own post-Brexit restrictions and may not accept EU-based addresses for new accounts or services.
Lastly, the tour bus does not simply breeze past the border like it once would have. Those who were legally living in Spain before December 31, 2020, may have secured residency rights under the Withdrawal Agreement, but they must prove it. The most common immigration option for other retirees is the non-lucrative visa, which is designed for people with sufficient income who don’t plan to work in Spain.
Americans and Brits may argue about coffee vs. tea, football vs. soccer, and who drives worse. But they can agree on one thing: Spain is a great place in which to retire.
Peter Dougherty is a Financial Planner at BISSAN Wealth Management in Spain. He holds an MBA in finance from Columbia University in New York and an MS in Spanish taxation (Máster en Fiscalidad y Tributación) from Nebrija University in Spain. He is certified as a European Financial Planner (EFP) in Spain and as a Chartered Retirement Planning Counselor® and Investment Adviser Representative in the United States.
BISSAN Wealth Management is both authorized by, and supervised by, the National Securities Market Commission (Comisión Nacional del Mercado de Valores), the Spanish government agency responsible for the financial regulation of the securities markets in Spain. BISSAN has offices in Barcelona and Bilbao.
For more information: https://www.financial-planning-in-spain.com
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