Advance Planning for Roth/ 401/HSA/ 429 accounts for future move to Canada

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Ashish_NY
Posts: 2
Joined: Wed Aug 15, 2018 1:44 pm

Advance Planning for Roth/ 401/HSA/ 429 accounts for future move to Canada

Post by Ashish_NY »

Hi All,

I am planning to move to Canada in an year or two and i was wondering if i should change my investment strategy till the move actually happens.

I have a 401K, HSA ,multiple Roth accounts and 429 accounts which i am currently max-ing out. Does it make sense to reduce my contributions to these so less of my money is stuck or impacted by penalties when i move?

Like reducing my 401 contribution just enough to get the employer contribution, have some in HSA as i can have medical needs for the time remaining here.

This would mean more cash in hand which i can put in CDs etc and it will be easy to move when i finally move to Canada.

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

Re: Advance Planning for Roth/ 401/HSA/ 429 accounts for future move to Canada

Post by nelsona »

529 plans are not recognized in Canada, so you will begin paying tax on the yearly accrued income.
Since it is doubtful that your 401(k) contributions will save more tax now than they will be taxed when they are withdrawn in Canada, you should probably shift to Roth401(K) at work. I would think that would be better than not contributing past your match amount. You can ALWAYS withdraw what you put into a Roth tax and penalty free.

Your HSA is fine, you can use it over the years to pay for the things that your provincial plans don't cover. Nothing to report for CRA (or IRS) if these are allowable expenses.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Ashish_NY
Posts: 2
Joined: Wed Aug 15, 2018 1:44 pm

Re: Advance Planning for Roth/ 401/HSA/ 429 accounts for future move to Canada

Post by Ashish_NY »

Thanks nelsona, appreciate you taking time to respond.

So in effect-

--I should stop contributing to the 429s (assuming there will be something similar in Canada)
--Good point on the 401 to Roth 401 conversion, my earning will be taxed but i can withdraw my contributions. However I will need to check if my employer offers that
--On HSA do you mean i can pay for my medical expenses in Canada with the account i have in US? HSA also has an investment part, how about that?
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Advance Planning for Roth/ 401/HSA/ 429 accounts for future move to Canada

Post by nelsona »

First off, you keep saying 429 plans. There are 529 plans (for education) I assume you are meaning this?

HSA:
HSA's are used to reimburse eligible medical expenses, it doesn't matter where or when. You probably would not be able to use the debit card associated with such an account in Canada, since the vendors are not coded for that, but you could certainly withdraw the money anytime after the expense is incurred. As to account itself, it is covered by treaty as both a employee benefit and a pension, so (a) the income the account accrues is not table each year, including investment growth, and (b) only income that is considered taxable in US would be taxable in Canada, and that would only be withdrawalss for non-eligible expenses. So if you strictly use your HSA for eligible medical expenses, there is nothing to report or pay in US or Canada. As with anyone using HSA in US, you would keep good records of your expenses and reimbursements, should IRS request proof of eligibility. Of course, since these expenses would be reimbursed, you could not deduct them as medical expenses on your Cdn return.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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