Move to Canada -- RRSP first year?

[steadgarwin]

I'm a US citizen moving to canada next year, and working there for the first time. Can I contribute to RRSP and/or get the company 7% matching in the first year?

I have read RRSP is based on prior year's income, is there no other out for people moving in, it's quite a pay cut. Does US income count?

thanks!

[steadgarwin]

Also, I wonder, if there is a penalty to contribute to RRSP the first year -- is it worth paying up to the company match? Even a 12% penalty would be a low cost compared to giving up the 100% "return" of a company match.

thanks!

[nelsona]

All new Cdn residents face this problem, since your contribution room is zero.
Any contrinutions made by you or your employer to your RRSP (over the first $2000) will incur a monthly penalty.

[steadgarwin]

It would be possible (but a little painful) to quit the American job say in Feb rather than Jan. In that way I could quickly max out my US 401k and receive employer match there, and not contribute to RRSP once I started in Canada in Feb.

Alternatively would it be reasonable to contribute to RRSP but each month simply withdraw the contribution I and my employer have made? In that way would I receive the employer's match and only effectively pay a 1% penalty? I guess there may be a lot of paperwork though at tax time.

thanks again!

[nelsona]

I would talk to your employer. Contributors to group RRSPs often deal with new hires that have no RRSP contribution room. They may have some workaraound.

Remember too, that the employer contributions are going to be taxable as income, so without the deduction, with the penalty, and with possibly some difficulty in withdrawing the funds, it may simply not be worth it to contribute in year one.

As to 401(K) contributions, why bother. you will be ina a low tax bracket in US that year that getting more deduction may hardly be worth it. I would rather you contribute to your Roth401(k).