I'm a commuter GC holder living in Canada, working in the U.S. I have some funds in my 401(k) but not contributing any more. I intend to retire in Canada (I'm a Canadian citizen).
I may have an opportunity to roll the old 401(k) into Roth 401(k). Is there any advantage? Other question: Is there any way to get the cash now (I have 6 years until retirement).
Thanks.
Commuter Alien living in Canada, 401(k) and RSP
Moderator: Mark T Serbinski CA CPA
Unfortunately, since you live in canada, there is no advantage, and in fact a disadvantage to rolling your 401(k) into a Roth.
First off you will be taxed (both in US and canada) on this transfer. Fully taxed in US, and perhaps fully taxed in canada, depending on where you were living when the contributions were made.
Second, because of the new rules enacted in the latest treaty, funding a Roth (which this would in effect be) while living in Canada immediately breaks the sheltering provisions of the Roth in Canada, and you would be liable each year for tax on the yearly internal income of the Roth.
You are likely better off from a tax point of view -- and most certainly from a reporting point of view -- to maintain your 401(k) as a sheltered, 'before-tax', account.
While this may -- repeat, may -- result in a little more US tax in the very long run. it will definitely result in less overall tax in US and Canada.
Should you ever decide to move to the states, it would be time to reconsider such a rollover, either to a Roth 401(k) or a Roth IRA (if you are no longer working for the same comapny).
First off you will be taxed (both in US and canada) on this transfer. Fully taxed in US, and perhaps fully taxed in canada, depending on where you were living when the contributions were made.
Second, because of the new rules enacted in the latest treaty, funding a Roth (which this would in effect be) while living in Canada immediately breaks the sheltering provisions of the Roth in Canada, and you would be liable each year for tax on the yearly internal income of the Roth.
You are likely better off from a tax point of view -- and most certainly from a reporting point of view -- to maintain your 401(k) as a sheltered, 'before-tax', account.
While this may -- repeat, may -- result in a little more US tax in the very long run. it will definitely result in less overall tax in US and Canada.
Should you ever decide to move to the states, it would be time to reconsider such a rollover, either to a Roth 401(k) or a Roth IRA (if you are no longer working for the same comapny).
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best