I saw a lot of discussion regarding what we should do for 401k when Canadian decided move back to Canada. I am still kind of confusion. Is anybody could help me to calculate what is the best way for me? How much I have to pay on US tax, Canada tax, penalty or any other charges? If my situation as the following:
2010 income: 100,000
401k self contribute: 150,000
401k company matched: 77,000
401k question with an example
Moderator: Mark T Serbinski CA CPA
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Mark T Serbinski CA CPA
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Likely the best thing to do is to leave the 401(k) intact, or roll it to an IRA, and keep it until your normal retirement age.
This prevents the imposition of the 10% early withdrawal penalty, and results in a diversified retirement portfolio.
If you move back to Canada, and live in Canada during retirement, your pension income will be taxable only in Canada (except for some withholding taxes which will be available for foreign tax credits), so you will not pay any additional tax later.
This prevents the imposition of the 10% early withdrawal penalty, and results in a diversified retirement portfolio.
If you move back to Canada, and live in Canada during retirement, your pension income will be taxable only in Canada (except for some withholding taxes which will be available for foreign tax credits), so you will not pay any additional tax later.
Mark
Likey better is to roll it into a Roth, and make it completely tax-free forever in both US and canada.
You do pay tax up front (i would try to time my departure from US in a low tax year) but no penalty.
The notion is to pay tax in low bracket now, and not in high bracket later. Say what you will about US and Canada tax rates, but I guarantee that Cdn tax rates will always be higher that US.
Leaving it IRA will guarantee being taxed at Cdn rates later, and will open up OAS clawback. Roth will not.
2010 offers a chance to defer tax on Roth rollover til next 2 years.
You do pay tax up front (i would try to time my departure from US in a low tax year) but no penalty.
The notion is to pay tax in low bracket now, and not in high bracket later. Say what you will about US and Canada tax rates, but I guarantee that Cdn tax rates will always be higher that US.
Leaving it IRA will guarantee being taxed at Cdn rates later, and will open up OAS clawback. Roth will not.
2010 offers a chance to defer tax on Roth rollover til next 2 years.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
You can look it up on the net, however in a nutshell:
If you live in canada, and recieve OAS (old age security), it is subject to "clawbacK", whereby, if you make more than a certain amount (now around $66K) in the calendar year, you must, on your tax return, pay back your OAS 0.15 for each dollar. It effectively makes you taxrate about 60%.
Your future OAS is then reduced.
This provision does NOT apply to non-resdints. So a US resident getting OAS, not only pays less tax on his income, but gets all of his OAS regardless of total income.
If you live in canada, and recieve OAS (old age security), it is subject to "clawbacK", whereby, if you make more than a certain amount (now around $66K) in the calendar year, you must, on your tax return, pay back your OAS 0.15 for each dollar. It effectively makes you taxrate about 60%.
Your future OAS is then reduced.
This provision does NOT apply to non-resdints. So a US resident getting OAS, not only pays less tax on his income, but gets all of his OAS regardless of total income.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best