401k to IRA to RRSP

[richiecry]

Hi. I am a Canadian that has lived in the USA for 11 years. I am planning to move back to Canada in the next few months. I have about 200k saved in my 401k and it is fully vested. Thanks to this forum...I know how to transfer the money (withdraw from 401k, place in IRA, withdraw from IRA WHILE a resident to avoid extra 10% penalty, and then transfer to RRSP). I have a couple questions if someone could help out. I want to withdraw about 20k (maybe less) to live on while I look for a job. I am thinking the best time to do this would be at the same time I am withdrawing the 401k...any ideas? The other question...although I would be able to claim the 20% paid to the IRS on my Canadian taxes...would this only work if I earned more money than the 20% amount claimed? I guess a final question would be...Is the scenario I have envisioned the best thing for me to do? I am 41, single and have no interest in staying in the USA or becoming a USA citizen. Thanks everyone! Cheers.

[nelsona]

While the 10% penalty would not apply on the 401(k) to IRA transfer (regardless if you were US resident at the time or not), the removal from the IRA to put into an RRSP mist certainly WILL result in 10% penatly, and the panalty will not be usable on your Cdn return.

A much bett idea (not thatRoth ar eaccepted in canada), is to transfer the 401(k) to a ROTH brfor eleaving US, paying the US tax once (no paenalty) and then being able to withdraw the mobney and grwoth tax-free in the future in both US abd canada.

There is no advantage in moving the 401(K) to canada unless it is very small or you are over 59 1/2.