401K Vs. Roth 401K

Larry83 · Post by **Larry83** » Thu Mar 01, 2012 4:25 pm

Hi - I've been working in the US for almost 5 years, and have a question about contributing to 401K vs Roth 401k.

Ideally, I would like to contribute to a Roth 401K (will never have to pay taxes on the gains). I am eligible to contribute the max, $17k this year, however will Canada honor this in the future?

Said another way, is there a chance that Canada will tax me on my withdrawals when I retire, even though I originally contributed after-tax dollars in the U.S.?

Any thoughts are appreciated!

Thanks

nelsona · Post by **nelsona** » Thu Mar 01, 2012 4:45 pm

This issue was resloved in the last round of treaty negociations.

As long as you do not contribute new funds to a Roth after returning to canada, you will not be taxed in US or Canada on any of the withdrawals.

This makes it advisable to put as much of your 401(k) funding into Roth (I like to use the tax bracket as my cut-off) as makes sense for you now, and then rollover any remaining 401(k) into Roth (and pay US tax), before returning to Canada.

Larry83 · Post by **Larry83** » Thu Mar 01, 2012 5:03 pm

This is great news (although I wish I didn't go with the Roth Deferral in 2011).

Thanks nelsona!