Government Pension Question

[niloch]

Hi.

We have been in the US for the past few years, my spouse was a federal employee on leave with the Federal Government in Canada, now that we've decided to stay in the US permanently (and retire here) we need to make some decisions on what to do with her pension. We are ~10 years away from retirement and she has 2 options we are considering:

option 1) annual payment starting at age 60
Option 2) take a cash payment now - half of which needs to go into an RRSP or RPP the other hav outside tax limits would be a cash payment.

For Option 1- would this be taxable at the RRSP rate at retirement (20%) or at our current income tax rate?

For Option 2 - Can we even divert the first portion to RRP/RRSP tax deferred or would we need to pay US Taxes? I'm assuming we'd pay taxes on the amount outside tax limits now.

Thanks,

[nelsona]

the RRSP tax rate for non-residents is ALWAYS 25%. If you convert an RRSP to a RRIF, you get 15% on the first 10% your withdraw.

Any lump sum taken now from a pension would be taxed at 25%.

Any funds from this pension, whether taken now, put in an RRSP/RRIF and taken later, will be fully includable in US yax when withdrawn. You will want to keep these funds separate from any RRSP you already have.

[niloch]

Hi,

Just so I'm clear - any disbursement (regardless of whether it goes into RRSP or not) would be taxed at 25% now (the year they cash it out)

For the portion that goes into an RRSP, would I then be able to withdraw it tax free later since I already paid 25% tax on it?

[nelsona]

Reread what I said, any lumpsum TAKEN now FROM the pension would be taxed at 25% in Canada and included in your income in US.

Moey ROLLED OVER to a RRSP/RRIF, would only be taxed when taken OUT later (at 15% or 25%) and be fully included in your US income at that time