what to do with my RRSP for another year

[redBlue 1]

I'm expecting all CR1 process to be completed for us next year around this time and moved to US which means I have another one year.

Now,I have that money in my RRSP ,doing nothing and waiting my decision to be made as to what would be the best investment choice for one year period.It's not in funds,GIC or anything else.

I've called a few bank,GIC rates are terrible.I'm also planning to withdraw the money when I move to U.S since what I'm hearing from people is that that's better than keeping it in Canada forever.

What would be your investment choice if you were in my shoes?

[Udella&Wiz 325]

I'm expecting all CR1 process to be completed for us next year around this time and moved to US which means I have another one year.

Now,I have that money in my RRSP ,doing nothing and waiting my decision to be made as to what would be the best investment choice for one year period.It's not in funds,GIC or anything else.

I've called a few bank,GIC rates are terrible.I'm also planning to withdraw the money when I move to U.S since what I'm hearing from people is that that's better than keeping it in Canada forever.

What would be your investment choice if you were in my shoes?

If you withdraw aren't you going to be hit by a higher tax rate witha larger lump sum? YIKES! Depends what you've got in there - (not trying to pry) if it's less then 10K and you're young, withdrawing all isn't suchh a bad option I suppose. Anyone else have thoughts?

Edited April 7, 2009 by Udella&Wiz

[redBlue 1]

I'm expecting all CR1 process to be completed for us next year around this time and moved to US which means I have another one year.

Now,I have that money in my RRSP ,doing nothing and waiting my decision to be made as to what would be the best investment choice for one year period.It's not in funds,GIC or anything else.

I've called a few bank,GIC rates are terrible.I'm also planning to withdraw the money when I move to U.S since what I'm hearing from people is that that's better than keeping it in Canada forever.

What would be your investment choice if you were in my shoes?

If you withdraw aren't you going to be hit by a higher tax rate witha larger lump sum? YIKES! Depends what you've got in there - (not trying to pry) if it's less then 10K and you're young, withdrawing all isn't suchh a bad option I suppose. Anyone else have thoughts?

It's around 20K and I'm around my mid 30s....

[Udella&Wiz 325]

I'm expecting all CR1 process to be completed for us next year around this time and moved to US which means I have another one year.

Now,I have that money in my RRSP ,doing nothing and waiting my decision to be made as to what would be the best investment choice for one year period.It's not in funds,GIC or anything else.

I've called a few bank,GIC rates are terrible.I'm also planning to withdraw the money when I move to U.S since what I'm hearing from people is that that's better than keeping it in Canada forever.

What would be your investment choice if you were in my shoes?

If you withdraw aren't you going to be hit by a higher tax rate witha larger lump sum? YIKES! Depends what you've got in there - (not trying to pry) if it's less then 10K and you're young, withdrawing all isn't suchh a bad option I suppose. Anyone else have thoughts?

It's around 20K and I'm around my mid 30s....

Same situation for me - I have a Locked in retirement account (rolled over from a company plan) - at the time last year, I could not withdraw and frankly I wouldn't have because taking the lump sum out would have put me in a higher tax rate - not great when you consider I'm half way through my working life and who wants to squander your hard saved money in taxes?

I've left mine invested as is, with interest and gains rolled back immediately into the plan. Maybe someday the exchange rate will be the reverse of what it is and it will pay for me to withdraw and exchange! Sorry, can't offer great investment advice for the long term...not many things are giving a good return right now.

Edited April 7, 2009 by Udella&Wiz

[S & J 0]

I'm expecting all CR1 process to be completed for us next year around this time and moved to US which means I have another one year.

Now,I have that money in my RRSP ,doing nothing and waiting my decision to be made as to what would be the best investment choice for one year period.It's not in funds,GIC or anything else.

I've called a few bank,GIC rates are terrible.I'm also planning to withdraw the money when I move to U.S since what I'm hearing from people is that that's better than keeping it in Canada forever.

What would be your investment choice if you were in my shoes?

If you withdraw aren't you going to be hit by a higher tax rate witha larger lump sum? YIKES! Depends what you've got in there - (not trying to pry) if it's less then 10K and you're young, withdrawing all isn't suchh a bad option I suppose. Anyone else have thoughts?

It's around 20K and I'm around my mid 30s....

My opinion...

If you are going to work in the US, leave it and don't forget to fill out IRS forms 8891 and 90-22.

If you are not going to be working I would split it into two $10,000 GICs that can be withdrawn whenever (can't remember what that is called) and then withdraw at the beginning of the following two years after immigrating. You would have 25% in tax taken of the top, but you then elect under 217 and the personal exemption will cover it, thus getting the money tax free.

[redBlue 1]

S & J

It sounds like a good idea.thnx

[Texanadian 10]

I recommend pulling as much as you can out the year you immigrate. But not so much as to bump you into the next tax bracket.

I really see no reason to keep a Canadian RRSP going while living in the USA. It means more stuff to file for your US tax return. You have to worry about the Cdn government INCREASING the non-resident tax rate in the future (it used to be 15%, now it's 25%. Could 30% be around the corner). You'll pay about half as much if not less in terms of expense fees on US IRA's compared to the expensive cost of CDN RRSP's. And lastly, when you move to the US, you won't be able to switch your RRSP's to different funds. So you're locked in to whatever you've invested in. In the US, you can change your funds anytime you want to a different fund.

Remember when you move to the US, if 90% of your worldwide income is Canadian, you'll be able to qualify for the full basic personal exemptions in Canada. You'll probably have an easier time getting a credit card if you have lots of money in your US bank account after moving too.

[Carlawarla 1]

I'm expecting all CR1 process to be completed for us next year around this time and moved to US which means I have another one year.

Now,I have that money in my RRSP ,doing nothing and waiting my decision to be made as to what would be the best investment choice for one year period.It's not in funds,GIC or anything else.

I've called a few bank,GIC rates are terrible.I'm also planning to withdraw the money when I move to U.S since what I'm hearing from people is that that's better than keeping it in Canada forever.

What would be your investment choice if you were in my shoes?

Where did you hear this? Personally, I'd be talking to a financial planner before doing anything with that money.

[redBlue 1]

Hi Carla:

I can't find a financial planner in my area who knows how to deal with Cdn & US taxation , RRSP& &IRS and all these related matters.If you know anybody in TO let me know.

VJ is the only place that I can find some info.

[Carlawarla 1]

Hi Carla:

I can't find a financial planner in my area who knows how to deal with Cdn & US taxation , RRSP& &IRS and all these related matters.If you know anybody in TO let me know.

VJ is the only place that I can find some info.

I got these referrals from two trusted VJ members:

http://hfg.ca/

http://www.centa.com/

Hope this helps!

[redBlue 1]

I recommend pulling as much as you can out the year you immigrate. But not so much as to bump you into the next tax bracket.

I really see no reason to keep a Canadian RRSP going while living in the USA. It means more stuff to file for your US tax return. You have to worry about the Cdn government INCREASING the non-resident tax rate in the future (it used to be 15%, now it's 25%. Could 30% be around the corner). You'll pay about half as much if not less in terms of expense fees on US IRA's compared to the expensive cost of CDN RRSP's. And lastly, when you move to the US, you won't be able to switch your RRSP's to different funds. So you're locked in to whatever you've invested in. In the US, you can change your funds anytime you want to a different fund.

Remember when you move to the US, if 90% of your worldwide income is Canadian, you'll be able to qualify for the full basic personal exemptions in Canada. You'll probably have an easier time getting a credit card if you have lots of money in your US bank account after moving too.

Thnx Taxanadian.

When you say " if 90% of your worldwide income is Canadian, you'll be able to qualify for the full basic personal exemptions in Canada".If I'm filing my tax with my spouse after I move to US,does that still valid?

[Texanadian 10]

Canada revenue doesn't care about your spouse. Because only the USA has "joint filing." Canada is taxing you based on your individual income.

I would recommend everybody read "The Border Guide" by Robert Keats. It has a great section on what to do about your RRSP's in regards to moving to the USA. Next to Visa Journey, it is hands down the best reading material I've seen about immigration.

If you're not planning on working for the next few years, you could do the $9600/year withdraws and then use the section 217 to claim it all back. But you still have to file it on your US return (since that's taxed on your worldwide income)

It seems to me that if you're only planning on working half the year, that you would be best to pull out the entire RRSP. Say you make $40,000 a year working in Canada. If you work half the year, you make $20,000. So pull out enough that you just barely stay under the Federal 22% tax bracket. Next year that looks to be around 40K. So pull out enough that you make about $39,900. Withdraw the rest the year later.....Now if you only have enough that withdrawing everything still keeps you close to the 15%/22% bracket line, might as well just pull it all out.

Canadians tend to worry about losing their tax deferred status when they empty out their RRSP and having to pay the tax man. But it's just so limiting keeping your money in an RRSP. You can do a spousal contribution to their IRA or 401K. You can do an HSA health insurance plan. You can simply keep the money in a high interest savings account like ING for the time that you're unemployed in the USA. And when you do go to put it away in an IRA, the fees will be dirt cheap in comparison. Anything more than about 1.5% with no load is rare in the US. Whereas in Canada anything under 2.5% with a sales load fee is hard to find.

The other thing to take note of is that the 2555-EZ foreign income exemption is only really usable your 1st year in the US. Since you need to have lived in a foreign country for it to work. The 1116 foreign tax credit doesn't really work that well in subsequent years. Sure you may be paying 25% non resident tax on that money from Canada, but the 1116 only will give you about 7% in tax credits for that foreign tax amount you've already paid. (assuming you're in the 15% US Federal bracket)

Pulling your money out before you leave also gives you options for filing for resident alien vs non-resident alien your first year in the US. As a resident alien, you'd be taxed on your world income for the full year, but you could take the 2555-EZ foreign income exemption and bypass probably all of your Canadian income. Or you could file as a non-resident alien which would only tax you on your US income for the year starting the day you arrived. This will result in probably no US tax on your since you probably won't be working the first year. Or if you do, it will be minimal taxation.

[Texanadian 10]

I don't know what state you're moving to. But some states will still tax you on your RRSP even though you've filed with the IRS to have them as sheltered due to their Canadian status. I'm lucky in that Texas doesn't have a state income tax. Makes tax time simpler and cheaper as I only have to deal with US Federal taxes. But even with Texas' no income tax status, the Canada-USA money transfer only works so well. Get that money out of Canada as quickly as you can without knocking yourself into a higher tax bracket and you'll be much happier and freer to choose how to keep your money saved.

[Texanadian 10]

The 25% non resident tax in Canada primarily benefits rich people. Take Celine Dion for example. She moved from Quebec to Nevada about 7 years ago. At the time she moved, Quebec's top tax bracket was 24% on income above $60,000. Ouch. That's not even including Canada federal taxes......She moved to Nevada where like Texas, they don't have a state income tax. So she went from 24% provincial tax to 0% state tax.

For somebody like her, she could pull a million dollars out of Canada after she moved and simply pay 25% non resident tax and then pay US federal tax on it after she got the money here. Beats paying 53% Canadian income tax (QB + Fed) on that money.*

There is a way to still pay 15% non resident tax in Canada. But you'd have to set up the money in a lifetime annuity. And that doesn't really work well for most of us. That's more for people who are retiring in the US. (picked this up from the Keats book I mentioned above)

With governments short of money everywhere, I wouldn't be surprised to see the current 25% non resident tax raised in Canada. It's an easy way to get more revenue from people who aren't going to create a fuss and make headlines about it. Not much chance in losing votes by raising the taxes on non-residents.

(* I'm not exactly sure how or if Quebec handles non resident taxes as they seem to have a different tax system than the other provinces. I'm basing this on how things work in British Columbia)

[S & J 0]

If you're not planning on working for the next few years, you could do the $9600/year withdraws and then use the section 217 to claim it all back. But you still have to file it on your US return (since that's taxed on your worldwide income) (assuming you're in the 15% US Federal bracket)

Just want to add here that you are not taxed by the US on the full amount only the growth from when you became an immigrant. The full value of the RRSP is reported on line 16a, but only the taxable portion on line 16b.

For example, GIC valued at $10,000 when immigrate, pull it two years later and it is worth $12,000 the taxable portion is $2,000 (example only .

The important part is being able to support the values being reported.