RRIF advice needed for US resident

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mikie
Posts: 25
Joined: Thu Jan 07, 2016 1:08 pm

RRIF advice needed for US resident

Post by mikie »

I have a RRIF of about $150K Cdn which I set up 3 years ago while a resident of Canada. I have been a resident of the USA since 2015,, will never move back to Canada, and am a US citizen. Although the RRIF portfolio is balanced, it has performed horribly mainly because of the decline of the Cdn $. At the moment I am set up for minimum monthly withdrawals, and 15% tax is being withheld by CRA. I would appreciate receiving advice.
nelsona
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Post by nelsona »

What about?

It probably shouldn't be invested in Canadian funds, since that is such a small part of the global market.

And you should probably take 10% a year out, which would still get you 15% Cdn tax. Maker sure you know what your non-taxable portion is in the RRIF (based on book value when you arrived in US). It shouldn't result in too much more tax in US.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
mikie
Posts: 25
Joined: Thu Jan 07, 2016 1:08 pm

Post by mikie »

Thanks, nelsona, your response helps a little. I should have added that I would be perfectly happy if the US $ equivalent of my RRIF showed modest growth. It seems to me that my options are (1) Withdraw all funds in the RRIF, let CRA have their 25% tax, and use the US foreign tax credit to pay the US tax . My tax obligation on these funds would thus be over forevermore. (2) Keep the RRIF, perhaps increasing the monthly withdrawals (as you suggested) but being sure to not exceed the limit for the 15% CRA tax rate. In this case, perhaps I should re-balance the portfolio to invest heavily in US equities, so as to mitigate currency risk? Can you or others with more financial wisdom than I offer their opinions? I have done a lot of online searching, but have not been able to find much help.
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

I wouldn't worry about currency, I would worry about performance. I would NOT be taking it all out at once. That will result in 25% tax which will not be used in US. There may be ways, especially as you near retirement, to reduce the 15% NR tax to an even lower amount, based on income, and your US tax may be smaller then too. You say your tax would be over "forevermore", well not really, as you would need to invest those funds in US, and eventually pay tax on growth too.

As a US resident, you are probably limited in the family of funds you can invest in your RRIF, but certainly enough to find. Nothing should be "heavily" invested in. That's why you have a portfolio: diversity.
This is not really the place to give advice on what are good investments vs bad. I deal more with strategies that reduce or mitigate tax issues.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Steve15
Posts: 75
Joined: Mon Jun 10, 2013 11:26 pm

Post by Steve15 »

Hi Nelsona,

I have a quick question about your comment concerning the ACB of the RRIF mentioned below.

You mentioned that the non-taxable portion (ACB) should be the value on ARRIVAL to the US. However, this individual is a US citizen. I always thought the ACB in this case would need to be tracked since inception of the RRSP, not only on the day of arrival to the US.

If this was the case, they could crystalize the gain in their RRSP before moving to the US like a NON-US Citizen could.

Maybe I’m mistaken about this, or you just missed the part about them being a US citizen.

Any clarification on this would be greatly appreciated.

Thanks as always.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Yes, I missed the fact that they were a US citizen (or perhaps misinterpreted that they had only recently become a US citizen. They do not get to crystallize, only the contributions that *could not* be deducted on their US returns are eligible to be considered non-taxable in US.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Steve15
Posts: 75
Joined: Mon Jun 10, 2013 11:26 pm

Post by Steve15 »

Ok thanks so much for confirming.

I was starting to question my own understanding of this.

Have a great summer!

Steve
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