Transfer IRA to RRIF?

kevind · Post by **kevind** » Mon May 03, 2010 12:38 pm

I know it's possible to transfer an IRA to a RRSP but can an IRA be transferred to a RRIF?

nelsona · Post by **nelsona** » Mon May 03, 2010 1:47 pm

Yes it can be transfrred to a RRIF.

But IRA transfer is not recommended unless you have at least that much Cdn-source income as you are transferring. and it will cost you 10% tax if younger than 60.

It is best to leave in US and draw as a pension, or convert to Roth before departure.

kevind · Post by **kevind** » Mon May 03, 2010 4:09 pm

Thanks for the reply but the RRIF holder is 74. I think the reason to switch is to avoid foreign exchange risk.

nelsona · Post by **nelsona** » Mon May 03, 2010 4:35 pm

So, no penalty.

However without equivalent Cdn-source income, the IRA tax cannot be used on the Cdn return, so the transfer will not be tax-free -- making the transfer double taxed (once as an IRA and once as a RRIF).

So the choices are simply collapse the IRA, and then he can do with the proceeds what he wishes, or change his investments in the IRA to mitigate exchange rate problems (ie. buy foreign assets).

nelsona · Post by **nelsona** » Mon May 03, 2010 4:35 pm

So any advisor who would encourage this person to undertake the transfer should be shot.