By Peter Dougherty
TALES of pirates burying treasure in far-off places have captured imaginations for centuries.
As Americans working in Spain, we may not be digging holes on tropical islands, but we too could be sitting on overlooked treasure.
The treasure is Social Security benefits that as American expats we may qualify to receive in the US or Spain.
Perhaps we realise we didn’t contribute for enough years to qualify in the United States (typically 40 credits, or 10 years of work). Or we know we haven’t worked long enough in Spain to qualify (typically at least 15 years of contributions).
Fortunately, this doesn’t mean the credits we’ve earned will be ‘marooned’ on a deserted island. Thanks to a treaty between the United States and Spain called the Totalisation Agreement, we can combine work credits to meet minimum eligibility requirements.
Best of all, the Totalisation Agreement works in both directions. We can use credits from Spain to help qualify for Social Security benefits in the US or credits from the United States to help qualify for benefits in Spain.
If our career has been split between the two countries, it’s easy to fall short of either threshold. The treaty solves this problem by allowing us to combine our work history, so those years aren’t lost.
It’s the equivalent of a modern treasure map.
Both Spain and the US look at our combined record to determine eligibility. Like pirates dividing spoils according to a strict code, today’s Social Security benefits are carefully allocated.
Each country pays benefits separately. The US can count your Spanish coverage to help you qualify, and if you become eligible this way, it will pay a pro-rated benefit based only on your US work history.
Similarly, Spain can count your US credits to help you meet its minimum years requirement, then pays a proportional pension based on your contributions in Spain.
This doesn’t mean the two systems merge into a single benefit – each country pays its own share.
Credits are combined only to qualify, not to increase our payout. Our credits do not transfer between countries. Instead, they remain in their original system and are simply recognised by the other.
In other words, even though our credits may be combined to qualify, our actual payments are based only on where we worked.
For example, if we worked 6 years in the US and 11 years in Spain, our US benefit is calculated using only those 6 US years, and our Spanish pension is based on our 11 years in Spain.
The filing process to ensure that our years of contributions will not slip overboard and be lost is straightforward.
If we live in Spain, we can contact the Federal Benefits Unit at the US Embassy in Madrid and submit a single application that can be treated as a claim in both countries.
Each country pays its own share: we won’t get a windfall, but we also won’t lose what we contributed.
The key is making sure we hit the minimums: at least 6 US credits (one and a half years), at least one year of Spanish coverage – so we can use this totalisation provision when the time comes.
We may never stumble across a pirate’s chest of gold, but if we’ve worked in both Spain and the United States, we could still uncover something valuable.
Thanks to the Totalisation Agreement, our ‘hidden treasure’ isn’t buried in sand. It’s built over years of work, and with the right map, it’s entirely within reach.
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 a European Financial Planner (EFP) in Spain and is a CERTIFIED FINANCIAL PLANNER™ professional and a Chartered Retirement Planning Counselor® in the United States.
For more information: https://www.financial-planning-in-spain.com
Peter Dougherty
- MBA in finance
- MS in Spanish taxation
- BS in Economics
- European Financial Planner in Spain
- Chartered Retirement Planning Counselor® in U.S.
- Author of two financial planning books
Certified Financial Planner™ in U.S.
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