My situation:
Age 45. Moving to canada to work for unknown period - suspect I will not retire there. I have been surprised to learn how few tax advantaged retirement savings options there are for canadians (RRSP? $18K per year?)
Assuming I will retire in the US, what are the best vehicles for retirement savings given tax implications for income in US etc. I am assuming (but may be wrong) that my wife & I should max out our RRSP and then address issues after that. Correct?
What are the other options? IRAs? Invest in tax advantaged US index funds that generate minimal capital gains or divdends?
Thanks!
Retirement savings for US citizen permanent resident in CA
Moderator: Mark T Serbinski CA CPA
Your best investment is likely your home. It will grow tax-free.
Your RRSP will do the important job of lowering your Cdn taxrate, which should be your primary concern right now. Same for company pensions.
An IRA at this point will not reduce your taxes, so is of little value.
When you return to US, rRSPs will be a bit of a nuisance to report and track (you will have to begin filing Form 8891 even while living in Canada).
Your RRSP will do the important job of lowering your Cdn taxrate, which should be your primary concern right now. Same for company pensions.
An IRA at this point will not reduce your taxes, so is of little value.
When you return to US, rRSPs will be a bit of a nuisance to report and track (you will have to begin filing Form 8891 even while living in Canada).
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
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Mark T Serbinski CA CPA
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Please keep in mind that although the capital gain on the sale of a principal residence is fully tax exempt in Canada, as a U.S. citizen you will be subject to U.S. rules on the sale of a Canadian home. This means that if you are married, a maximum of $US 500,000 of the gain would be exempt from tax in the U.S.
If you are self employed, an Independent Pension Plan (IPP) can help you make tax advantaged contributions which exceed the RRSP maximums each year.
If you are self employed, an Independent Pension Plan (IPP) can help you make tax advantaged contributions which exceed the RRSP maximums each year.
Mark
I think that as a US citizen you may still want to contribute to a Roth IRA. While it is virtually useless in Canada since the CRA taxes income inside a Roth, it will be nice to have if/when you move back to the US.
As I understand it, in order to contribute the full amount to a Roth you need to have at least $4k of "earned income" on your US return. If you use the 2555, make sure you exclude all but $4k, then use tax credits to eliminate tax on that amount. Or, alternatively, if you solely use tax credits (form 1116) instead of the 2555, you should be in good shape.
... at least that's my understanding... maybe Mark or Nelsona can confirm how this works?
One other consideration (if you make a lot of $$$) is the maximum allowable income for Roth eligibility. Maximum earnings for a single filer (before Roth phases out) is $95k. I wonder how using the foreign income exclusion effects this amount???? e.g. Let's say (for a single filer) you make $175k US.... by excluding $80k (or whatever the max is these days) does that make your modified adjusted gross income $95k?
Again, this is a quesion that maybe the board's experts can shed some light on?
As I understand it, in order to contribute the full amount to a Roth you need to have at least $4k of "earned income" on your US return. If you use the 2555, make sure you exclude all but $4k, then use tax credits to eliminate tax on that amount. Or, alternatively, if you solely use tax credits (form 1116) instead of the 2555, you should be in good shape.
... at least that's my understanding... maybe Mark or Nelsona can confirm how this works?
One other consideration (if you make a lot of $$$) is the maximum allowable income for Roth eligibility. Maximum earnings for a single filer (before Roth phases out) is $95k. I wonder how using the foreign income exclusion effects this amount???? e.g. Let's say (for a single filer) you make $175k US.... by excluding $80k (or whatever the max is these days) does that make your modified adjusted gross income $95k?
Again, this is a quesion that maybe the board's experts can shed some light on?
Bruce makes a good point.
If one were to initailly invest in Roth such that no internal income was generated (ie. tax-advantaged funds, or stocks which do not yeild dividends), one could have a Roth and not pay a cent in canada while they were here, for say, 5-10 years. By then, who knows, Roths may have more favouarble treatment by canada, or one may be able to defer taxation.
One BIG problem though would be deemed dispostion on departure from canada. Even if your funds had no geneartyed income, on date of departure you would have to pay on any unrealized and untaxed gains in the account, so the Roth would not prove much more useful than a straight investmant account up until then.
You might have trouble finding a broker to deal a roth with a Cdn resident. though.
If one were to initailly invest in Roth such that no internal income was generated (ie. tax-advantaged funds, or stocks which do not yeild dividends), one could have a Roth and not pay a cent in canada while they were here, for say, 5-10 years. By then, who knows, Roths may have more favouarble treatment by canada, or one may be able to defer taxation.
One BIG problem though would be deemed dispostion on departure from canada. Even if your funds had no geneartyed income, on date of departure you would have to pay on any unrealized and untaxed gains in the account, so the Roth would not prove much more useful than a straight investmant account up until then.
You might have trouble finding a broker to deal a roth with a Cdn resident. though.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing