Dateline: Tbilisi, Georgia

One of the reasons that a US citizen would consider getting a second passport — whether it’s economic, ancestral, through naturalization, or otherwise — is because they want to renounce their citizenship.US citizens are one of the only citizens on earth required to pay taxes on both active and passive income. And that’s regardless of where they live.

Some entrepreneurs are able to minimize or even eliminate US taxation through the Foreign Earned Income Exclusion. But not all business owners and self-employed individuals can shield all their income from US tax. In some cases, the only way to successfully eliminate US taxes and the onerous reporting requirements that come with US citizenship is to renounce that citizenship.

You can be an employee earning a salary that goes above and beyond the FEIE limit. Or a business owner with a company “too big” to justify an exemptible salary of $101,300. Or a successful consultant working in your own name or a real estate investor who cannot exempt your passive income earnings, there are always many logical financial reasons to renounce your US citizenship.

BUT, there is one issue. When I talk to people about renouncing US citizenship, I come across two different sentiments: excitement and worry. On the one hand, there are people who are excited about the idea and don’t care about losing their citizenship. For them, they know that at some point they will renounce. It’s going to happen.

The second type of people, however, are the ones who say upfront that they don’t want to renounce their citizenship. That’s fine. Still, the real reason for their refusal usually surfaces at some point and it often goes along the lines of the following. “I’ve spent all my life paying into these different systems and what happens to my money if I renounce my citizenship? Won’t it all just go away?”

In fact, I’ve found that people in both camps (especially if they’re older and have been paying into the system for a long time) deal with these types of questions.

So today I want to address these concerns and let you know exactly what will happen to your Social Security, Medicare and other government pensions if you were to renounce your US citizenship.

Social Security

We’ve already discussed how you can receive your Social Security benefits while living overseas. But it turns out that you can also maintain those benefits even if you renounce your US citizenship. To qualify for all Social Security benefits, you’re required to have worked at least forty calendar quarters in the US.

Essentially, that works out to be about ten years of work.

Fortunately, those ten years do not have to be consecutive. They can be any time you paid into Social Security, be it childhood jobs or corporate jobs on Wall Street.

However, you had to have met a certain earning limit for any three month period to qualify as a quarter. For example, in 2016, you must earn at least $1,260 in a quarter to count as a “quarter of coverage”. (You can go here to see how much you needed to earn in past quarters.)

Another important point to take into account, since 1978, quarters have been calculated annually. As ElderLaw explains it, if you earned $5,040 in January and February of this year and didn’t work for the rest of the year, you will still receive credit for four quarters of work ($5,040/$1,260 = 4).

If you meet the minimum requirement of 40 quarters, your earnings in those 40 quarters will be averaged out to determine how much you will receive in Social Security payments. Obviously, if you work for more than ten years, you will build up more.

The issue with Social Security for most of us who are a little bit younger isn’t whether or not we’ll be able to receive payments if you renounce your US citizenship, but whether or not the money will even be around when we retire.

Currently, Social Security is not based on need, but on income earned throughout your working life. It may not always be like that. There is a chance that Social Security will eventually be means-tested.

In other words, people who have any kind of net worth (maybe even foreign bank accounts tracked by FBAR) may not qualify for Social Security. If you have money overseas, certain net worth, income from other pensions or annuities, passive income from rental properties, etc. there’s a chance they could just say “You don’t get Social Security.” Or maybe you’ll just get half.

Certainly, I think benefits are going to go down. But that’s a separate discussion. The point is that, whatever is left of the Social Security when it’s your turn to cash in, you will get whether or not you renounce your US citizenship. It’s your money. And, though I hate to say it, the US is actually more fair than some other countries in this regard.

Now, of course, we’ve talked about Social Security in our previous article. They won’t pay you in a small number of countries, including Georgia for some reason going back 30 years. However, if you’re living in certain places you can get your Social Security benefits wherever you want. So it’s not a big deal.

Again, Social Security may not be around in the future when you retire, but there are some benefits to it. The most important thing to take away from all of this is that renouncing your citizenship will not have an impact. It will not create any more problems than the ones that already exist within the Social Security program. If you’re rich and you’re a US citizen, you’ll be a rich non-US citizen.


Just like Social Security, Medicare benefits are still available even after you renounce your UScitizenship. However, unlike Social Security, those benefits are not available anywhere in the world. Only in the US.

The challenge with this is that most people are not going to get a second passport that allows them visa-free access to the United States.

At the moment, there are around 40 visa waiver countries that have visa-free access to the US. Chances are you won’t be getting citizenship in one of them. Especially if you’re buying a second passport because the only visa waiver country that has an economic citizenship program is Malta.

So, unless you marry someone or go and live in a high tax country for a while, chances are you will not have a second passport from a visa waiver country. And this is one of the things that a lot of US citizens are afraid of. If you get a second passport from anywhere basically outside the European Union and the richest countries in the world (like Singapore), you’re not going to have visa-free access to the US.

What does that mean?

Well, Medicare does not provide benefits overseas. I do think that there will come a time — perhaps at the expense of higher taxes for the rich — when some politicians in the US will do what some companies have done and will just pay for you to fly to Malaysia to get medical care. I can see Medicare overseas being an option someday. But not today.

As of right now, to receive Medicare benefits you have to go to the US, if you can get in. If you can get into the US you can get your care. If you don’t have one of those 40 visa waiver passports, that will mean getting a visa. Now, I don’t think the US government is going to be very sympathetic to a guy who renounced his citizenship saying he needs to get a visa for medical care. If you don’t get the visa on any other grounds, they’re not going to be very sympathetic.

That said, they’re not going to be less sympathetic if you renounce your US citizenship as of now. Obviously, Medicare could change, especially if we have Medicare for all. Who knows what it will look like in the future? But as of today, you’ll get your Medicare so long as you can get back into the United States.

Military & Government Pensions

Typically, military benefits, municipal pensions, state government pensions, etc. are gone once you renounce your US citizenship.

For instance, no matter how long you served, once you renounce your US citizenship, all military benefits are gone. Believe it or not, I’ve talked to veterans who served ten years in the US and now they’re waking up and don’t agree with any of the stuff going on. If that’s you, if you’re going to get a $50,000 yearly pension from the military any time soon, you might not want to renounce your US citizenship.

Actually, I tend to think that the military is one of the safest places from which to get a pension. A few years ago I wrote an article about California pensions. The state is bankrupt and there’s a good chance California’s government pensions won’t be around in the future — even for US citizens. The military, on the other hand, is much more reliable.

Either way, if you’re older and about to receive a pension, you probably don’t want to renounce your US citizenship. If you’re younger and you can afford to give up whatever benefits you have, that’s great. Just realize that if you work for the city, state, military, etc. and you renounce, you’re not going to get those benefits. (I believe this also applies to veterans’ healthcare, but I’ll let you do your homework on that one).

So basically you’re two for three when it comes to what you’ll maintain versus lose if you were to renounce your US citizenship. Not bad. Many people feel that if you were to renounce your US citizenship, it’d be like poking the hornets’ nest. But it’s your right to do it and there are many things you won’t give up if you do.

US Banks After You Renounce Your US Citizenship

Say you did renounce your US citizenship, what will happen to your finances? Can you still use US banks? And how will getting a second passport affect your financial situation? Let’s take a deeper dive together and answer all your finance questions. 

US Banks for Second Passport Holders

Having a second passport, in and of itself, does not inherently change anything about your situation. If you’re  banking in the United States and you have a US passport, you should keep using your US passport. It shouldn’t change anything. Even if you’re a US citizen with seven other citizenships, to the US government and banks, you’re still a US citizen.

[Side note: One thing I do tell people when they get a second passport is to keep it to themselves. There’s nothing wrong with sharing it, but don’t do so unnecessarily and don’t go bragging to your bank. Don’t walk into Chase Bank in Salt Lake City and say you hate the United States and that you’re going to renounce your US citizenship because you just got a Dominican second passport. Don’t do that. No need to be shy, but don’t bring it into conversations where it’s not needed.]

Now, wherever you are a citizen, they will always view you as a citizen of that country. That’s why you have to enter that country on that country’s passport. If you’re a US citizen and a Canadian citizen, you enter the US as an American. You don’t enter the US as a Canadian, you’re not allowed. The same rule applies in most of the world.

It’s also the same for the financial institutions that you deal with. While there’s no need for you to tell your bank that you have other citizenships, if they ask you should tell the truth. I would never encourage you to lie to your bank. Always tell a bank the truth.

However, the only time I’ve ever been asked if I have other nationalities that I can recall is when I was applying for global entry. (the US “trusted traveler” program that my United card paid for so that its elite members could allegedly bypass the security lines at three different US airports). In all my travels, that was the only time I can recall ever being asked “Do you have other nationalities?”

So if you’re asked, volunteer. If you’re not asked, don’t.

Bottom line is that when you get a second passport, you don’t need to shut any of your accounts down. Nothing particularly changes.

Using A Second Passport to Open Offshore Accounts

What does happen, however, is that when you get new accounts you can choose what passport to use. Now, the difficult thing when you’re a US citizen is that you really should be honest and tell them that you’re a US citizen.

I’ve heard of guys who use little tricks, but I wouldn’t recommend them. For example, I know a guy who got Irish citizenship and it just so happened that the county he was from in the US had the same name as a county in Ireland. When he was asked where he was born, he just put the county.

I never know what to put on my passport, but when asked I put Ohio, USA. I don’t think they care so much about Cleveland. But I guess passports accept a lot of different answers and this guy tried to pull one over on people so that when he went somewhere with his Irish second passport he could claim that he was not American — or at least they’d never suspect he was because they’d just automatically assume that he was born in the Irish version of the county.

I don’t really recommend doing that.

After all, if you’re still a US citizen then you’re under the requirement to declare any foreign bank account. If you open a bank account with a Dominican passport — or whatever second passport you have — and you’re a US citizen, you should declare it. This is especially true if you were born in the US, which is most of us. Most of us don’t get US passports without being born there.

So you should declare and you should fill out the forms. You’re required to, anyway. Remember, the US government doesn’t care what other citizenship or second passport you have, and that includes when it comes to opening (and reporting) bank accounts. You have to declare that you’re a US citizen. You even have to report your bank accounts, whether the bank has your US passport or not.

I wouldn’t play games with the bank… and there’s no way to play games with the IRS and the Treasury department.

How Will Renouncing Citizenship Affect My Finances?

Now, let’s talk about what happens if you are no longer a US citizen. The first plus is that there are going to be banks that will be more open to taking you. For example, some banks in Switzerland are more open to taking non-US citizens. I’ve even seen banks in Hong Kong (where it’s becoming very difficult) be more open to non-US citizens.

For instance, I’ve seen situations where two guys go in and it’s easier for the non-American than it is for the American to open an account. I saw that when I went with three other non-Americans to Singapore last year. I was not opening an account, but I noticed that the more free and easy-going their countries were, the easier and faster it was for them to open their accounts.

But what happens to your accounts back home if you renounce your US citizenship? To be perfectly clear, this is not legal advice. I am not a lawyer, banker or accountant. However, the impression I had after asking numerous people is that if you renounce your US citizenship it doesn’t necessarily mean you have to close your accounts. And it could be a US passport or most others.

For example, if you open a bank account or credit card in the US with a social security number and you have a credit report, you don’t lose your social security number. Remember from a couple weeks ago: you don’t lose Social Security benefits if you renounce your US citizenship. It’s still yours. You still have a number. You still have a credit report.

Furthermore, if you have existing credit cards there’s no need to close your account because you renounced being a US citizen. For example, I have a US-based American Express card and I think the US has the best American Express cards. I don’t want a Malaysian American Express card. I want a US American Express card. From consulting with American Express I’ve learned that as long as you still have a social security number and a credit report and you still pay the bill on time, you should be fine.

Other banks have told me the same thing.

Applying for New Credit after Renouncing

Again, that’s just me asking a bunch of different people. Who knows what it really is. The real issue is applying for new credit. Here’s the deal: there are a lot of banks and credit cards in the US and in other countries that ask whether or not you’re a US citizen or resident. If you renounce your US citizenship, you’re not likely to become a US resident. If that’s the case, you’ll have a tough time getting approved for more credit.

There may be some banks that will offer you new credit, however, your choices will be limited in both quantity and quality. For example, Bank of America had a big thing where they were accepting “illegal aliens”. They were opening credit cards for them, BUT they had to have a credit score. But who wants a credit card from Bank of America anyway? It’s a horrible bank.

So, yes, you may be able to get new credit from certain banks, but you won’t have access to the best options — especially if you’re trying to get US credit cards that earn better miles. In a nutshell, you may be able to keep your existing accounts, but it’s more difficult getting new accounts.

You decide.

What About Non-US Citizens?

As you can tell, this article is currently only regarding US citizen readers who renounce citizenship. We’ll add insights on other countries in the future, so be sure to come back and check this article later. However, because US citizenship is the citizenship people most often want to renounce for logistical purposes, that’s what we’ve covered.

Plus, if you’re Canadian, Australian or European, your current main concern should be about becoming tax non-resident, rather than renouncing.

On the other hand, people in emerging world countries like China where dual citizenship is not really allowed, will often just stay in China and hide their other citizenship. Others go abroad to somewhere like Europe and begin using the other citizenship without China’s knowledge. In reality, China likes people to leave the country, they just don’t want dual citizenship.

The same goes for certain other countries. I know Malaysians who weren’t renouncing Malaysian citizenship to become British, they kept it a secret that they had both.

In all honesty, very few people are going to renounce a quality western citizenship, and people with the lesser quality ones are not going to feel the need to renounce.

Andrew Henderson
Last updated: Oct 12, 2021 at 12:46PM