Investment suggestions for IRA once back in Canada

[Russ]

I read all about the idea that with an existing IRA somewhere like TD / Ameritrade, once you become a US non-resident, you can't trade inside your IRA.

Knowing that, I've heard that before becoming a non-res, you set up your IRA to have a few 'self-running' investments like a couple of index funds, spiders, etc. on different boards, so they aren't touched - and you don't get wiped out by leaving the investments in something more volatile. (which again, legally, you can't get out of).

Anybody have any suggestions on what investments they've chosen that are like what I've described?

Thx.

[Norbert Schlenker]

I have an IRA at TD, they know I'm in Canada, and they haven't given me any grief about the account or trading in it since 2000. I'm a little concerned about the Ameritrade takeover but my plan is to deal with problems if they arise.

[Russ]

That's a good deal. My concern is that I'd been told - by a TD investment person in Canada - that I wouldn't be able to do anything in my account once I became a Canadian resident again. His recommendation was to talk with a TD Investor guy in the US to set me up with investments that couldn't be touched but will still take advantage of the times (ie: indexes, etc.).

I also wonder what will happen now that they're TD Ameritrade. If it's anything like most other mergers that have affected me (ie: Cingular / AT&T Wireless), options will be taken away ... and costs go up.

Russ

[nelsona]

Russ, the rules are not so strict for IRA-holders in Canada as they are for RRSP-holders in US, so I would not take Cdn info as gospel.

All I would say is to nail down absolutely whether or not your IRA manager will allow you to keep your account active when you leave US, but do so BEFORE leaving.

[Norbert Schlenker]

In retrospect, I should have handled this more simply than I did. My IRA is only a small piece of my portfolio, about 2%. Instead of running the risk that a broker like TD would go insane about Canadian residents - which they almost did in 2000 - I should have handed the account to Vanguard, put it in one fund with dividends automatically reinvested, and never looked at it again.

That works for tiny fractions of a portfolio because, even on autopilot, you can dedicate the whole account to one asset class and not have to worry that anything will go seriously awry because you can make adjustments elsewhere to compensate. Your situation may be different of course. If your IRA is a significant fraction - perhaps all - of your portfolio, you need to be able to trade it occasionally.

[Norbert Schlenker]

All I would say is to nail down absolutely whether or not your IRA manager will allow you to keep your account active when you leave US, but do so BEFORE leaving.

That's good advice but you need to be very careful about your tactics. If you call the broker or fund company before you leave the US, tell them you're going to Canada, and identify yourself as a current account holder, you run the risk that they will insist that you move the account elsewhere before you leave. They could easily make some excuse like "We can't handle accounts outside the country" when what they mean is "We don't want to handle ..."

[Russ]

Sure would be useful if a company like TD Ameritrade (where my IRA is as well) would guarantee that they would do this for a Canadian resident.

My only concern is that if I had investments with them that were not just indexes, etc. and I became a Canadian resident again, and I called for a trade, that they would not make any changes anymore due to a new policy.

Of course, my stuff would probably be in JDS Uniphase or something brilliant - and there it would have to stay.

I suppose nothing (ya', but death and taxes) is guaranteed ...

[Rickerbucks]

Just to confirm. You can ALWAYS sell your investments, - they cannot stop you from doing that - but some companies do not allow you to re-invest.

As of this moment, TD Ameritrade will allow an existing client that moves to Canada to continue to trade their IRA account if they move to the US. Although the merger has impacted other $CDN accounts, personally I see no reason why the IRA policy would be changed but.....

[thegarnetgroup]

I'm a Canadian working with RBC Dain Rauscher. I can tell you we allow Canadians to hold and trade IRA accounts. I would also suggest that if you've been contributing in a 401k it would be a good idea to roll those asstes into your IRA.

[Norbert Schlenker]

I would also suggest that if you've been contributing in a 401k it would be a good idea to roll those asstes into your IRA.

Why?

[Russ]

I have seen this advice given on forums before and thought the reason was because an IRA is an agreed upon retirement plan in the US that Canada recognizes whereas a 401K is not.

[nelsona]

401(k)'s and IRA's are both recognized by CRA.

However, technically, if one were to want to 'move' an 401(k) into an RRSP, one would first have to convert to an IRA, by the CRA's written instructions on this specific matter. It is already a complicated process (not one I rcommend), so the 401(k) to IRA transfer beforehand adds another level of complexity.

The main reasons to switch out of a 401(k0 to an IRA are not cross-border related, but arise out of the greater flexibility that an IRA would have over the (relatively) small number of funds available to a specific 401(k) pakn.

Also, the IRA allows for certain withdrawals without penalty from an IRA that it does not permit from a 401(k).

If, on the other hand, one is happy with the flexibility of their 401(k), and the manager is willing to dealwith you cross-border, and you aren't pursuing one of the withdrawls that is IRA-only, there is no absolute need to roll your 401(k) over to and IRA, merely because you are leaving the US.

[nelsona]

I would point out, though, in the context of this thread, that a person who sells IRAs and is not mananging your 401(k)'s will always advise you that it is best to roll it to an IRA (shucks, maybe even their IRA,eh?).

[sxc234]

Does anyone know the legal implications on the account holder if they are a Canadian Resident but still hold an IRA account with a US Brokerage and trades within that account actively?

[nelsona]

This is legal -- for retirement accounts.