By Lisa Jorgensen, Publisher, Lake Chapala Reporter
For American retirees at Lake Chapala, two questions come up more than almost any other: will my Social Security keep coming, and what happens to my Medicare? In the current political climate — with persistent anxiety about budget cuts, staffing reductions at the Social Security Administration, and a volatile administration in Washington — those questions feel more urgent than ever.
Here is what you actually need to know, separated from the noise.
Social Security: The Good News First
Moving abroad does not cancel, reduce, or pause your Social Security payments. US citizens who have earned at least 40 credits — roughly ten years of work history paying into the system — can collect Social Security retirement benefits while living in most foreign countries. Mexico is not on any restricted list. Your payments continue.
The 2026 average monthly benefit is $2,071, with a maximum of $4,152 at full retirement age of 67. A 2.8% COLA increase took effect in 2026.
There is also genuinely good news from January 2025 that many expats may have missed. The Social Security Fairness Act, signed into law on January 4, 2025, eliminated two provisions that previously reduced benefits for people who also receive a pension from work not covered by Social Security — the Windfall Elimination Provision and the Government Pension Offset. For expats who worked abroad and earned a foreign pension, the WEP previously reduced US benefits. That reduction is now gone. Affected beneficiaries are seeing an average monthly increase of $360, with retroactive payments back to January 2024.
If you have a foreign pension and haven’t checked your recent Social Security statements, it’s worth doing so now.
The Real Concern: SSA Staffing and Service Cuts
While your benefits themselves are not being cut, the agency that administers them has been significantly weakened — and that has real practical consequences for expats.
After the Trump administration deployed DOGE on the Social Security Administration, the agency lost more staff in a shorter period than at any time in its 90-year history. As of January 2026, the SSA continues to operate at historically low staffing levels, following reductions of approximately 6,500-7,000 positions in 2025. The agency hired fewer than 100 employees in all of 2025 — the lowest number on record.
What does this mean practically for Lake Chapala expats?
Starting in April 2025, individuals could no longer apply for Social Security benefits or make changes to their direct deposit information over the phone in most cases — they had to visit local offices or set up online accounts. For expats living in Mexico, visiting a local office means a trip back to the United States.
The SSA subsequently reversed part of this policy. On April 14, 2025, enhanced fraud prevention tools were implemented, allowing individuals to complete all claims via telephone. Applications for Social Security Disability Insurance, Supplemental Security Income, and Medicare are exempt from in-person identity proofing and can still be fully completed over the phone. Direct deposit changes can also be requested by phone.
Nevertheless, with reduced staffing and growing backlogs, getting through to SSA by phone or resolving issues remotely is taking longer than it used to. If you have any pending matters with SSA — a direct deposit change, a name update, an address change — deal with it now rather than waiting until it becomes urgent.
What to Do Right Now
- Set up your online My Social Security account at ssa.gov if you haven’t already. This is your most reliable way to manage your benefits from Mexico without depending on phone access or office visits. You can check your payment history, update your address, and manage direct deposit online.
- Make sure your direct deposit is current. If you’re receiving payments to a US bank account, confirm the account is active and accessible. If you want payments sent to a Mexican bank account, SSA offers international direct deposit in many countries — use the appropriate SSA-1199 international direct deposit form and confirm Mexico is currently supported on SSA’s international direct deposit country list before making changes.
- Keep your contact information updated with SSA. Living abroad, you are required to notify SSA of address changes. Failure to respond to SSA questionnaires can result in payment suspension.
Social Security and Taxes
A common source of confusion for expats: up to 85% of your Social Security benefits may be taxable on your US return. The Foreign Earned Income Exclusion does not apply to Social Security income. However, the Foreign Tax Credit can prevent double taxation, and some tax treaties exempt Social Security from US tax entirely. Mexico and the US do not currently have a tax treaty covering Social Security specifically — this is worth discussing with a cross-border tax professional if you haven’t already. Lakeside Tax Service is a good one to try.
A significant new tax break — the OBBBA Senior Deduction
The One Big Beautiful Bill Act, signed into law in July 2025, introduced a new $6,000 tax deduction for Americans aged 65 and older, available for tax years 2025 through 2028. For married couples where both spouses are 65 or older, the deduction doubles to $12,000.
This is a “below-the-line” deduction that stacks on top of both the standard deduction and the existing additional standard deduction for seniors — meaning it applies whether you itemize or not. It phases out for single filers with modified adjusted gross income above $75,000, and for married couples above $150,000, phasing out completely at $175,000 and $250,000 respectively.
For most Lake Chapala expats receiving Social Security as their primary income, this deduction — combined with the existing standard deduction — may reduce or eliminate federal taxes on their benefits entirely for these four years.
US citizens living abroad qualify for this deduction on the same basis as US residents, provided they file a US tax return and meet the normal eligibility rules. The Foreign Earned Income Exclusion and Foreign Tax Credit do not affect eligibility.
This deduction expires after 2028 unless Congress acts to extend it. Use these four years wisely — consult a cross-border tax professional about whether a Roth conversion or other income-timing strategy makes sense while the deduction is available.
Medicare: The Honest Answer
Americans contemplating a move to Mexico often ask whether Medicare is valid here. The simple answer is no.
If you get sick or injured in Mexico, Original Medicare will not pay for your hospital care, your doctor visits, or your prescription drugs. You will be responsible for 100% of the medical costs. There are narrow exceptions — if a Mexican hospital is genuinely closer to you than the nearest US hospital capable of treating your condition — but these rarely apply to Lake Chapala residents in practice.
Should You Keep Medicare or Drop It?
This is the question most Lake Chapala expats wrestle with — and the answer is not straightforward.
Part A — Keep it.
Most expats should keep Part A, as it is typically premium-free for those who have worked and paid Medicare taxes for at least ten years. Since it costs you nothing, there is no reason to drop it. It remains available whenever you visit or return to the US.
Part B — Think carefully.
The Part B premium is $202.90 per month as of 2026. Keeping Part B may not be worth the cost if you live abroad permanently and do not take frequent trips to the US — you must continue paying monthly Part B premiums even though Medicare will not cover your care in Mexico.
However, and this is critical, if you do not enroll in Part B when first eligible and decide to enroll later, you may face a late enrollment penalty that increases the longer you delay. If there is any chance you will return to the US for extended periods or permanently, dropping Part B to save the premium may cost you significantly more in the long run.
The right decision depends on your individual situation: how often you travel to the US, whether you plan to return permanently at some point, and your overall health. This is a decision worth discussing with a Medicare specialist before making.
What to Use Instead of Medicare in Mexico
Since Medicare doesn’t cover you here, your healthcare options at Lake Chapala are:
Private health insurance — the primary choice for most expats. Major medical coverage for someone in their 60s without significant health history runs $2,000-$6,000 USD per year. Costs rise 10-20% annually. Mexican insurers often decline new applicants over 65 and routinely cancel coverage around age 75. International insurers such as Cigna Global and Aetna International can be more flexible on age but cost more.
One critical warning: always verify that any private health insurance is underwritten by a company officially authorized by the Mexican federal government. Unauthorized companies — sometimes US-based and presenting themselves attractively — are not legally obligated to pay claims. Verify any insurer against the official list maintained by Mexico’s insurance regulator, the CNSF (Comisión Nacional de Seguros y Fianzas) at cnsf.gob.mx.
A well-established and trusted starting point in the Lake Chapala expat community is Parker Insurance Services, located at Hidalgo 81, Riberas del Pilar, phone 376-765-5287. They handle health, auto, and home insurance and have long experience working with expat clients navigating the local insurance landscape.
IMSS voluntary enrollment — available to foreign residents with Residente Temporal or Permanente status, with annual premiums around 18,300 pesos (approximately $1,000 USD) for someone in their 60s. Enrollment windows are January-February and July-August only. Pre-existing conditions are treated strictly. Worth considering as a hospital safety net rather than primary coverage. See our earlier Insider article on healthcare at Lake Chapala for full details.
Emergency medical evacuation insurance — covers transport back to the US if needed for a major medical event. Without it, an air ambulance from Mexico can cost $25,000-$60,000 out of pocket. At $200-$400 per year for a solid plan, it is one of the most cost-effective insurance purchases an expat can make.
The Bottom Line
Your Social Security is not going away. The payments continue, the amounts have increased, and a significant improvement for those with foreign pensions took effect in January 2025. The practical challenge is a weakened SSA bureaucracy that is slower and harder to reach than it used to be — which makes it more important than ever to manage your account proactively online.
Medicare stops at the US border. It will not cover your care at Lake Chapala regardless of what happens in Washington. Plan your healthcare coverage in Mexico independently — and don’t make any decisions about dropping Medicare coverage without understanding the long-term penalty implications.
The political noise in Washington is real and the uncertainty is real. But for American expats at Lake Chapala, the fundamentals remain intact: your Social Security keeps coming, the new senior tax deduction puts money back in your pocket through 2028, and your healthcare costs here remain dramatically lower than what you left behind.
A note for Canadian readers: CPP, OAS, and provincial health insurance involve a completely different set of rules for expats living abroad. This article addresses US-specific benefits only. Canadian expats should consult a Canadian cross-border tax and benefits specialist for guidance specific to their situation.
Next week in the Lake Chapala Insider: Mexican residence visas in 2026, Temporal and Permanente: what’s changed, and what the new financial thresholds mean for prospective expats.
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