TN Visa / California / RRSP / TFSA Strategy Question

[braindrain]

Thank you for this informative website. I've done some searching and learning but I still have a few unanswered questions; hopefully this may be also interesting for other readers.

I am considering moving from Vancouver to California for a job in April 2015. I'm looking at something like 150K in salary.

I have an RBC Direct investment account with the approximately the following assets:

UnReg - 50K
TFSA - 50K
RRSP - 150K

These investments are your regular 'balanced' mix index ETFs and a few stocks.

I also have a locked in corporate RPP that's around 55K (and growing) that I am no longer contributing to since I have left the employer.

Questions:

1) I can see the value in collapsing the TFSA. Thank-you for explaining this. But I am still a bit confused about timing. Am I stuck with the complex reporting of my TFSA in the US if I haven't cancelled my TFSA before the beginning of 2015 - or do I just need to just collapse it before I enter the US?

2) For the RRSP do I simply buy/sell the winners in the portfolio to reset the book value to it's highest amount before entering the US and then report on its market value increase for the time I am working in the US? Is their any advantage for me to dissolve the RRSP - it seems like the withdraw tax hit would be too large for me to do this. I plan to retire in Canada.

3) Can I still do web-based self directed trading in my RBC Direct account when I am in the US?

Thank-you for your kind response

A

[nelsona]

1. It will depend on how you file in US this year. If you file full-year, you will need to follow all the reporting issues related to TFSA's regardless of when you collapse it. if you collapse now and file dual-status, then that can be avoided. But you will be paying US tax on the growth in in your TFSA, either from Jan 1 or from April if you keep the TFSA, putting aside the reporting issues.

2. Not quite. You would only pay tax on the growth if you sell off some or all of your RRSP. If you keep your RRSP until you return to Canada, you would pay nothing in US. The 25% tax you would pay to CRA (after you become US resident, not before) would be the smallest tax you would ever expect to pay on that money, so collapsing it while in US is almost always the way to go.

3. No. No non-sheltered accounts can be maintained. You would need to transfer holding (that you could) to a US broker, and sell the rest. Remember that you will have departure tax regardless. And even your RRSP has to be with a CDn firm licensed to deal with you in US (you should find that out now).

[braindrain]

1 - clear. thank-you

2 - interesting. Left registered my 150K RRSP may appreciate by a few hundred K in 20 years with no tax incurred on that compounding appreciation and maybe more than 25% paid when withdrawn in retirement. If I'm in the US and I unregister it at the attractive 25% tax penalty then it can't grow tax deferred anymore and I pay high tax on the subsequent unregistered earnings for life. I'm not an expert but this doesn't seem like a slam dunk. Am I missing something important?

3 - clear and useful, thank-you

[nelsona]

2. Yes you are missing something important. I think you are missing the point of how money grows in US. You can take that 120K and invest it in US, and it will always be taxed less than 25%. Put it in your house and it grows tax-free. Long-term cap gains are 0 or 15%.

Your RRSP is guaranteed never to be tax free.

[nelsona]

Sock as much as you can into Roth/Roth410(k) and that money WILL be sheltered AND tax-free later both in US and Canada.

It sounds like you are not familiar enough with the US retirement arrangements. Feeing up that 120K from your RRSP for a price of only 25% now is the way to go unless you are in your mid-50's. At thatp oint I would be saying convert now to a RRIF and take it out 10% a year at 15% tax.

[braindrain]

understood. thank-you so much for helping me with the fundamentals. i can see that hiring a tax adviser / investment strategist is likely a good investment too :)

[Subaron]

[quote="braindrain"]

I also have a locked in corporate RPP that's around 55K (and growing) that I am no longer contributing to since I have left the employer.

A[/quote]

Did you ever figure out how to report RPP. More importantly if it can be deferred and if so how?