On the Money is a monthly advice column. If you want advice on spending, saving, investing, or the complicated emotions that come with making big financial decisions, Submit your question in this formHere are edited and condensed responses to two questions submitted by Vox readers.
I moved to the US just two years ago. I am retired in my home country and have a pension and some savings, but I feel this money is not enough to support my future retirement in the US. What should I do?
As a personal finance expert, I know that if you don’t have enough money to support your future, you have to figure out how to make more money.
Unfortunately, I am not an immigration expert and cannot advise you on the different ways to make more money. Cambridge Immigration Law.
“The first thing you need to understand is whether you have the legal right to work in the United States,” Sullivan told me, “and then you need to make sure there aren’t any restrictions on your work permit.”
Sullivan, who has worked in U.S. immigration law for 19 years, explained that many lawful permanent residents have unlimited work permits that allow them to work anywhere. “Some people have work visas that tie them to a specific employer, but many can work wherever they choose, or wherever they can find work. They can work in an office, they can work at Walmart.”
You might also want to consider other ways to earn income, such as investing. “In the United States, you can invest regardless of your immigration status,” Sullivan says. “This includes investing in real estate.”
If you have the ability to invest in real estate (which may not be an option right now), you may be able to make additional income by renting out your property. “Being a landlord is an investment, not a job,” Sullivan explains. “That means you can be a landlord even if you don’t have a work permit.”
No matter how you earn your income, be sure to follow the tax laws that apply to you in both the U.S. and your home country. “Any income you earn in the U.S. is taxable and may also be taxable in your home country,” Sullivan says. It’s also a good idea to speak with a tax professional about your potential tax liability, especially if you’re not sure how much you need to pay.
We also asked Sullivan what immigrants want to know if they’re considering working behind the scenes. He explained that there are two separate issues at play here: the work itself, and the taxes they may have to pay on their earnings. “If you choose to work without authorization or ignore your tax obligations, this is a civil and criminal violation,” he said.
Many people earn income through informal, semi-legal work (such as babysitting or tutoring paid in cash) and believe that they do not have to report this work to the IRS. This is a misconception that could harm you in the long run. Even undocumented immigrants who work informal jobs are still required to file tax returns with the IRS every year.
Another factor to consider when planning the next stage of your life in the United States is whether you need to move to an area with a lower cost of living. We don’t know where you live or if you want to stay where you are to be closer to your family and community, but moving to a cheaper part of the country could allow you to live off your pension and savings without needing to get another job. That said, many American adults continue to work in some capacity after retirement, so your situation is not unique or unusual.
In other words, welcome to America.
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I will be turning 65 this year and would like to know if I will be penalized for making stocks, bonds, or any other type of investment while receiving Social Security Disability Retirement.
As far as I understand it, you won’t be penalized for investing while receiving Social Security Disability benefits, but again, this is a question you’ll need to take to a professional.
“It’s possible to invest while on Social Security Disability (SSD),” says Andrew Latham, a chartered financial planner who shares financial insights on his blog. Super MoneyLatham explained that investment income is generally not considered “earned income” and therefore does not affect SSD benefits.
That said, you may want to keep track of your total assets. “If you’re also receiving Supplemental Social Security Income (SSI), be aware of the strict asset limits of $2,000 for individuals and $3,000 for married couples,” Latham told me. “You can invest, but if you do well and earn more than the asset limits, you’re probably going to have to reinvest.” Reduction or denial of SSI benefits.”
I asked Latham if putting money into an investment reduces the total asset pool. For example, if an individual has $3,000 in assets, can they invest $1,000 and maintain their SSI benefits? Latham replied no. “Investing excess assets generally doesn’t help SSI, because the principal of investments in stocks, mutual funds, savings bonds, etc. counts as assets.”
I also spoke with the owner of Gym One. Wallet HackWang considers the National Association of Social Security Advocates to be the go-to source for these kinds of questions. “I researched this topic when my parents first started receiving Social Security benefits,” Wang explains. “The Social Security Administration has websitespecifies that only wages from a job, net earnings from self-employment, bonuses, commissions, and vacation pay are included. Pensions, annuity insurance, investment income, interest, veterans benefits, and other government or military retirement benefits are not counted.”
So far it looks like you can invest without incurring penalties while receiving Social Security Disability benefits, but there’s one other thing to be aware of.
“You need earned income to put money into an IRA or Roth IRA,” says Mark Burns, an enrolled agent and family office director. Copper Canyon Tax and Accounting ServicesIf you don’t have earned income (and many Social Security Disability recipients don’t), you can still invest in a brokerage account, but you may need to prepare for tax consequences.
“Brokerage accounts don’t offer a tax deduction, and any gains, interest or dividends earned from them will show up on your tax return and can lead to higher taxable income,” Burns explains. “Brokerage accounts aren’t bad, but too many advisors take a one-size-fits-all approach to investing, resulting in too much taxable activity on their clients’ tax returns, which is completely unnecessary.”
I’m sure you’re wishing you’d stopped reading my advice column a few paragraphs ago. Unfortunately, things get even more complicated.
“If your disability pension is your only income, a few dollars in interest or dividends won’t make much of a difference, and your tax rate will likely be 0 percent, not enough to make your disability or Social Security pension taxable,” Burns told me. “If you’re married and your spouse has an income, you’ve likely already paid tax on your disability or Social Security pension, so you need to give more thought to your investments.”
I’m 65. Yes, you can invest. No, you probably won’t be penalized. And yes, you should definitely consider the potential tax implications before making any investments.
And as I always remind people, don’t invest money you can’t afford to lose.