401K and future action

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

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Waters
Posts: 11
Joined: Thu Jan 09, 2014 12:33 am

401K and future action

Post by Waters »

Hi Forum,

We are Canadian currently on TN visa , during last 12 months, we max. our 401K contribution based on IRA limit, but after did bit of research on what to do in the future, seems we would be likely transfer it to RRSP , so 25% withhold.

Compare to tax saving is less than 20%, are we doing it right?

Thanks,
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

You maxed out your 401(k) based on 401(k) limit, which is 18K, not IRA limit which is $5500, I presume.

You are corredct that saving 20% tax now only to pay MUCH more than 25% later when in Canada is not the best.

The better cours e is to use the Roth401(K) option that your employer provides, and leave it tax free forever. You don't save the 20% now, but never pay tax on that money or growth in futire.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Waters
Posts: 11
Joined: Thu Jan 09, 2014 12:33 am

Post by Waters »

Thanks Nelsona, so we can transfer to RRSP from Roth 401 K with no withhold, right?
Also we can only contribute up to 5500 each year to it.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Please educate yourself on the differences between roths, IRAs and 401(k) options.

NONE of these are equiv to RRSP.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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