Transfer 401K to an IRA

[baileybones]

I worked in the US for 10 years but returned to Canada last year. When I left the US last year I left behind (with Vanguard) an IRA and a 401K. I just received a letter from Vanguard stating that as of Dec 07 they will no longer receive contributions from Canadian residents. Dividends and capital gains are OK, just no new contributions.

I was thinking of moving my 401K over to my IRA while I can and wanted to make sure there are no tax implications involved. I know for US purposes there is no tax to be paid as it's considered a rollover. My question is would there be any tax to be paid to CRA? Do they consider it the same as the US? I called CRA but the person I talked to couldn't give me a clear answer.

Also - is there an advantage or disadvantage of doing this (401K to an IRA) in the long run? I know both are taxable when making withdrawls but are they basically taxed the same way?

Thank You

[nelsona]

Rolling over your 401(k) to an IRA is standard procedure for anyone leaving a company. it has no tax implications in either US or canada, as long as all the money is rolled over.

It is standard to not allow further contributions to your IRA. Will vanguard allow you to trsde -- this is the key question. If not you should be moving both your traditianl IRA and your rollover to anothr firm that accepts trades.

The eventual taxation will be identical be it an IRA or 401(K). generally an IRA has more fund options to choose from.