Retiring Outside of Washington

Moving to another state

You can relocate anywhere within the United States and receive your retirement income the same as you would if you lived here in Washington. Keep state income tax in mind if you plan to live outside Washington. We don’t have a state income tax, but if you move to a state that does you will have to pay any pension income taxes owed to that state. We don’t withhold state income tax for any payments issued outside of the Deferred Compensation Program (DCP).

Also, your pension plan contributions were likely pretax. If so, you will have to pay federal income tax when you receive your retirement payments. These taxes will apply no matter where you relocate.

Retiring outside the country

Planning to live outside the United States in retirement? Here’s what to do.

If you’re thinking about living outside the US in retirement, you’ll want time to research how you’ll access your funds.

Security risks are high in financial as well as technical industries. Modern prevention measures are often extreme, especially when it comes to foreign transactions. This extra security can present a challenge for collecting your retirement income outside the US.

Talk to your bank

The most important step you can take is to have a conversation with your financial institutions – both foreign and US, about your relocation as well as options for receiving payment. It’s important to be honest about your situation. For customers straddling two countries, we’ve seen US banks close customer accounts when the physical address is foreign, simply as a security measure.

Talk to DRS

Contact DRS and let us know you are moving, ideally before we start issuing your payments. There are different forms and reporting requirements for international customer payments. For example, instead of an W9 for tax withholding, non-citizens with an international address need to complete a W8. And instead of a 1099 tax report, you’ll receive a 1042 report each year. If you are a Plan 3 or DCP member receiving payments from the DRS record keeper, Voya Financial, you may have to periodically resubmit your documents.

Research tax requirements

If you are a US citizen living anywhere in the world, you will be responsible for paying federal taxes on your benefit payments. You will also be responsible for paying any income taxes required by the country in which you reside. If you have a Roth account, such as Washington’s DCP Roth option, you might wonder whether foreign countries honor Roth income as tax-free. Check the rules and regulations for the destination country. In many cases, countries will tax your worldwide income whether or not it has already been taxed.

How do DRS customers receive their pension payments if they live outside the US?

Direct deposit

For some countries, direct deposit payments to your bank account are possible. There are several banks that operate in the US and abroad. If your bank has a branch in the US as well as the destination country, we have seen successful direct deposits in many cases.

We require a 9-digit US routing number to implement the transfer. Many foreign banks use routing systems that are incompatible with US banking and financial systems. We cannot guarantee your bank will accept our deposit, so please work with your bank to understand their policies.

Paper checks

In most cases, paper checks are the solution for international customers. However, some countries are moving toward a paperless system. For example, we know that Australia and Norway will not accept paper checks. Again, call your bank to see what they recommend.

Are there any other ways?

Accessing DRS payments in a foreign country can require some creative solutions. Some customers have success using prepaid debit cards from a third-party vendor, but fees often apply.

DRS is not able to offer advice on how you can receive payments outside of traditional methods.

Here’s the bottom line – If you are planning to move out of country in retirement, it’s important to communicate and to explore your options.