QUESTION: Hello David,
I am a Canadian resident and have been living in Florida for quite a while
without becoming officially a resident...I am thinking of becoming a USA
resident. I have RRSP in Canada and also have a 401K and a IRA in the USA.
Can I transfer my RRSPs to IRA or 401K? Are there any
advantages/disavantages in doing so?
In the far futur when my children are holder, I may move back to Canada. Can
I Then change my IRA and 401K to RRSPs? Are there any
advantages/disadvantages in doing so ?
Thank you very much.
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david ingram replies:
Because you have a 401(K) and an IRA, I have to assume that you are there on
an L, H or TN visa. As such, you are there as a resident alien for TAX
PURPOSES as soon as you have been there more than 183 days in a year or have
moved there with your family and are working there.
What you have not done, I assume is apply for and receive a "Resident Alien"
or "Green" Card for IMMIGRATION PURPOSES.
If possible, I recommend the Green Card because it allows you to change jobs
at will and after three (married to an American) or five years, you can
become a US citizen.
----------
If you are working in Canada when you come back to Canada it is possible to
convert an IRA to an RRSP by a round about method. You get the 401(K)
transferred by rolling it into an IRA first.
Do I recommend it? Sometimes, Not usually, it depends!
Because of currency conversions and the high Canadian stock market, it was
absolutely, the thing to do from Mar 15, 2000 to Jan 31st 2006. Today, I
might be inclined to leave it in the US if I had another pension growing in
Canada or maybe roll over half of it into a Canadian RRSP.
The following older Q&A might assist you.
QUESTION:
worked in CA for 4 yrs. returned to BC in Apr.'04. Need to transfer my
retirement fund but having difficulties with bank and credit union. US
specifies that I must roll it over to IRA account (Individual retirement
account. I do not want to be subject to the 20% withholding fee for IRS.
What would be the best way to get the funds to me here in Canada.
=======================================
david ingram replies:
1. move it to an IRA and leave it there in one of the world's strongest
economies. Most financial advisors are trying to get "more" of their
clients' money into US funds.
2. If you just have to have it in Canada, you have to cash it in in the
US and pay your tax to the US. take what is left, add the amount (even if
borrowed) of the tax you paid to the US and buy your Canadian RRSP. That
will give you a tax deduction which should be larger than the tax you paid
to the US.
When you get the refund, pay back the loan. You will have transferred the
money quite handily.
The amount you took out is also taxable on your Canadian return. Pay that
tax with the tax you paid to the US as a foreign tax credit.
You will likely need help.
Fred Snyder at (604) 731-8900 (Dundee Wealth management) or Shaun Rickerby
at (604) 482-5188 (TS Waterhouse) can help you with the process if you are
coming back to BC. Darrell Thompson with Blackmont Securities in Toronto
(866) 776-7704 can help you with the US and Canadian side just about
anywhere because of his licensing.
----------------------------------
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