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Ashley is the founder and Executive Director of the Global Financial Planning Institute, and the founder and Principal of Areté Wealth Strategists Australia, a fee-only financial planning and investment management firm for Australian/American expatriates in the United States and Australia.
March 10, 2021

4 Major Challenges of the U.S. Financial System for Expats

There are five major weaknesses in the American financial system -- tax, healthcare, education, and the retirement system -- that expats and their advisors should keep in mind when evaluating the U.S. financial system.

Among global tax systems, the American tax system is one of the most complicated, with onerous reporting obligations and steep penalties. Taxes are levied in multiple, overlaying jurisdictions and on a bewildering collection of assets and activities. Reporting is exceptionally difficult to manage, requiring professional help and considerable expense.

Health insurance is managed privately, except for the Medicare system available to those 65 and over and Medicaid available to the poor and disabled. Many Americans and expats access health insurance through their employers, while others access private plans on a federal or state exchange.

While free public education is available for children ages five to 18, the quality is quite uneven. Private and charter schools offer alternatives. Universities are quite expensive, although some students qualify for significant amounts of financial aid.

Retirement in America can be challenging. The Social Security System provides some basic income for retirees with at least 10 years of employment that contributed to this system or the systems of other countries. Tax-advantaged retirement savings accounts are also available in which some employers match a certain level of participant contributions.

While these aspects of the U.S. system aren’t the easiest to navigate, they aren’t immovable obstacles. Understanding how these challenges create roadblocks can help you successfully navigate them.

Challenge #1: Multi-layered Tax System

For expats used to a simpler income and GST/VAT consumption tax system, the American tax system can seem weirdly complex. Individual and corporate income is taxed at the federal level; however, state and local income taxes vary from non-existent to exorbitant.

Nine states, including Alaska, Florida, Nevada, South Dakota, New Hampshire, Tennessee, Texas, Washington and Wyoming, don’t tax income. However, New Hampshire and Tennessee, while they don’t tax income, do tax investment earnings. Some localities, which include counties, cities and towns, may levy additional local income taxes. These requirements force millions of Americans and expats to file complex tax returns in multiple jurisdictions.

The federal government also imposes taxes on employers and employees to cover the Medicare and Medicaid health insurance programs and the Social Security retirement systems. These taxes are automatically taken out of your paycheck if you are employed, along with federal and any state and local taxes.

If you are self-employed or retired, you must make estimated tax payments with the federal government and your state government, if your state is one of the 41 states and numerous other territories, including the District of Columbia, which imposes income taxes.

Challenge #2: Private healthcare system

There is no American national healthcare system but there are several different ways to obtain health insurance in the United States. If you are under 65 and employed with a wage above the poverty line, you either need to get it from your employer or enroll in a private plan through a federal or state healthcare exchange. If you are over 65, you can enroll in Medicare provided you meet certain conditions. Access to Medicaid depends on where you live, your income, and the size of your family.

The most common way to get health insurance is through your employer. Your employer may offer several different health insurance plans with a variety of deductibles and copays. If your employer doesn’t offer health insurance or you are self-employed, permanent, legal U.S. residents can enroll in exchange-based plans and will pay an income-based premium.

Challenge #3: Complex Educational System

If you have children ages five or six to 18, you can enroll them in your local public schools. In many areas, public schools are excellent; in others, not so great. With funds coming from local property taxes, it tends to follow that higher income neighborhoods have better quality schools. You can investigate local school ranking systems and schedule visits at local schools to help you assess the quality of your local district. You can also explore charter and private schools.

For post-secondary education, American colleges and universities can be public or private. Public colleges and universities are affiliated with specific states and generally offer lower tuition, room and board to their state residents. Private colleges and universities tend to charge higher tuition, room and board, although financial aid packages can discount these below that of comparable public schools.

Challenge #4: Complicated Retirement System

Everyone who contributes to the Social Security system for at least 10 years or has equivalent work history abroad is entitled to a monthly retirement benefit. Make sure to apply for a Social Security number when you apply for a permanent resident visa.

If you are a permanent legal resident of the United States who has worked in America and contributed to the Social Security system for 10 years or who has earned an equivalent of Social Security credits in another country, you can receive benefits. If you are eligible, you can claim Social Security as early as age 62 or as late as age 70. The longer you wait to claim, the higher your monthly benefit.

You can also participate in employer tax and non-tax deferred programs such as 401(k)s or 403(b)s but these plans are offered at the discretion of your employer. Programs available to the self-employed include SEP and SIMPLE IRAs. Traditional or Roth IRAs are also available to individuals to supplement company benefits, depending on your income.

Despite its’ Challenges, America is Still a Wealth Building Platform

Though the U.S. spends more on healthcare per capita than any other country, the American public’s health outcomes do not keep pace with other developed countries. Regulations protecting competition and exorbitant spending on administrative expenses highlight the inefficiency of the United States’ healthcare system.

In a similar vein, the U.S. spends above average on education yet lags in academic performance. Critics point to unequal school funding as well as overall deficits in government funding as responsible for creating large disparities in education quality and access.

Despite the disadvantages of American residency, the U.S. economy system still provides the potential to build and protect significant wealth – more so than most other countries.


States with no income tax, Business Insider, Oct. 1, 2020,

Immigration status and the Marketplace,,

Can non-U.S. citizens receive Social Security benefits? AARP, Oct. 10, 2018,

Qualifying for Social Security as a Legal Immigrant,”, Oct. 16, 2020, asp

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