It is important to note that skipping social security taxes is not a way to build wealth, the way to build wealth is to generate more revenue. However, digital nomads have a choice to pay social security taxes or not.

But, what if instead of skipping it, our self-employed person was to save it into a retirement account, either an IRA or a foreign equivalent?

It seems to make sense. The return on the stock market over decades will probably exceed the return from Social Security. A major problem would occur if he/she was to move back to a country with a Social Security totalization agreement (or the United States itself), then he/she would be mandated to pay either social security taxes or a foreign equivalent, but after having spent a few years (decades?) not having contributed, he/she might be unable to reach full retirement benefits.

But wait, it gets better…

Let’s take the hypothetical example of a US citizen, 35 y/o who is self-employed and will spend some time working in a country without a totalization agreement. He just divorced his wife after 10 years of marriage, his wife will earn the Social Security Maximum Taxable Earnings and either work in a country with a totalization agreement or in the United States itself, his future is more uncertain. Under current rules, he would receive benefits equal to 50% of hers provided he was unmarried when reaching age 62 (I guess for the next one, it’s going to be “I, ___, take thee, ___, to be my wedded husband/wife, to have and to hold, from this day forward, for better, for worse, for richer, for poorer, in sickness and in health, to love and to cherish, till I reach age 62”, aww so romantic)

In this scenario, there would be little downside to not contributing into Social Security and saving into a retirement account instead … provided that social security laws remain unchanged until he reaches age 62 … which is highly unlikely.

If the system gets weakened and this ex-spousal benefit was to no longer exist, whereas benefits earned by his own record/contributions would remain largely unchanged, then, he might regret not having contributed, and this is also a real possibility.

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