IRAs for non resident citizens

[coco1106]

Hi everyone,
my husband and I are dual citizens usa/Canada , we live in ohio and plan on moving to Ontario next year.
we are both 55 and do not plan on working in Canada, we have 401k ,IRA,ROTHS HSA with Fidelity , husband said once he leaves his job he will rollover the 401k to a IRA.

After researching what to do with our retirement accts, my fear if fidelity will not allow us to maintain our accts once we leave USA, WE a meeting planned in the summer, but my understanding is they are not licenced in Canada to maintain accts. I know all mutual funds would have to be liquidated, but they could be changed to something else which is permissible.
we have a 7 figure acct with fidelity, I have heard horror stories that brokerage firms have sent letters to customers saying they will liquidate their retirement acct and without 30%!!!
I am also concerned about HSA we have 35k is that considered a retirement acct in Canada?

so My main concern is, does any one know if Fidelity will allow non us residents to keep their IRA in usa ??
I did reach out to Raymond James, who told me they are licensed to serve us/canada clients with IRA etc
any input would be very much appreciated , alot of sleepless nights and worry about this , like I said we are not moving until next year, I just want to have a plan in place,...........also I have a appt with a cross boarder tax specialist this summer, thanks everyone.

[Phil Hogan, CA]

Hi Coco

This has become a huge issue for out clients. I've had over 10 clients with Fidelity be forced to close their accounts and in one case Fidelity forced a de-registration of a large IRA. Luckily we were able to reverse the transfer before the client cash the cheque they sent.

Fidelity is not the only US broker that is pushing out Canadians as we've seen the same from Charles Schwab, UBS and Merrill.

It's very important that you plan for these accounts before you become a Canadian resident as many of the planning opportunities will not be available after to you enter Canada.

We have access to some great cross border financial planners that can help with the transfer and planning. Give me a call and we can walk through your options.

Cheers

Phil

[nelsona]

Yikes!
One on the other issues when having to switch one's 401(k) to an IRA is that one loses the ability to pension-split with these funds. CRA will not allow pension-splitting for IRA's, not even "rollover" IRA's.

And, from the US point of view, if under 59.5, you lose the ability to withdraw penalty free once you move it to an IRA.
This is really bad news if you have a fidelity 401(K)

As to HSA's, they are indeed treated like retirement accocuts, but this simply means that if you use them as intended, for medical expenses, you will not be taxed in Canada or US. Trust me, you will have medical expenses (dental, vision, prescription, and a whole whack of fees that weren't there when you left).

[coco1106]

Nelson,

I think we really are just wanting a place to leave the funds while living in ontario, husband said he would leave the funds, and just let any growth to be reinvested ( said he would liquidate mutual funds, since that is a definite no-no !!)
we would not touch anything until we are allowed to.

Do you know any firms that would allow us keep our IRA,roths in the US while living in Canada , this is a massive stubble block for us at the moment, not sure what direction to take, if we dont figure this out I am not sure we will be able to move back home ( we are dual citizens), basically we just want to leave the funds in USA, not touch them)
We have saved hard for 25 yrs, living very modestly.
I am feeling uncomfortable with Fidelity, they dont really give me a answer.


We have any information would be very much appreciated.
thanks you, have a lovely day.

[coco1106]

vanguard said no, Charles Sch said maybe ??
I am at a loss .

[nelsona]

The Fidelity issue is news to me, over the past 4-5 years we have heard a few on this website confirm that Fidelity IS allowing customers to keep (or allow others customers to move to Fidelity ) their 401(k)/IRA when moving to Canada

Your experience is not the norm with Fidelity. Do you have this "decision" in writing? Many times (and we have seen this in the opposite direction with Cdns moving to the US), the firm (or the client) fail to distinguish between retirement funds and investment funds during their discussion. And we have seen the "opinion" of one agent, be finally overturned when one gets in touch with the "regulatory/compliance" division of these firms.

Non-retirement investment accounts are indeed a non-no. But retirement funds are allowed to be maintained (at the discretion of the managing firm).

Btw, if one is given permission to maintain their account, then whatever funds within the account are eligible, there would be no need to sell off mutual funds unless one wanted to. The entire 401(k)/IRA is unaffected. The *purchase* of some fund companies may be restricted.

[coco1106]

Nelsona,

We have a meeting with Fidelty in May , so I have not been told directly that they will not allow us to keep our IRAs with them,
its just that after reading and researching I thought that since we will be NON US residents then they would make us withdraw our funds, I hope the case is that they will allow us to leave the account in USA, and just let it sit there until we are able to withdraw funds down the road.

I read horror stories that Fidelity sent letters to people to liquidate everything once they changed to a canadian address , I am hoping I am getting this all wrong and IRAs are ok to remain in USA while we live in Canada.
we have IRA, ROTHS, HSA.....if we can just leave everything here at just let it grow I will be happy.

Like I said we have a meeting in may with them, also I set up a meeting with a cross/boarder tax specialist in Canada .

Thank you for your reply,

[coco1106]

Nelsona
regulatory/compliance" division of these firms......This is the division I will asking for when we have a meeting, thank you for this,

[nelsona]

You want to get *in writing* from their competent person department that deal with foreign issues. it MUST include Canada specifically, and perhaps even the province you will be living in.
Again, your experience with vanguard is out of the ordinary, too.

Are you asking the right questions?

Can I ask what you are meeting with Fidelity about other than to discuss this issue? There isn't much value talking face-to-face with someone who isn't going to be able to do anything with your account except tell you to sell.

I'm also curious where you read these stories about Fidelity Schwab, etc....

[coco1106]

Hi,
Yes I will definitely get a letter,

I have read on this site that letters were sent to them, and just from researching on line that fidelity was not registered to advise non USA residents,
I hope I am totally wrong, and we are able to maintain our IRAs in USA.

I reached out to Vanguard and they told me that they do not service non US residents even with a IRA.
Again, hoping I am totally wrong and we can just leave everything with Fidelity.

[coco1106]

nelsona, read the first post from Phil , he said he has clients with fidelity.
I get a bit nervous with it all
thanks

[nelsona]

Understand,
But a little surprising that Phil just happens to jump online today with this info a few hours after you post.

Is there a "change"? if there is, this is great info from Phil, wonder why we didn't here it sooner, but thanks all the same.

We have posts as recently as Nov 2108 that confirm various firms as allowing 401(k)/IRA's without issue from Fidelity and others. We are NOT talking non-sheltered accounts here -- which are generally forbidden.

While it would be "ok" to have to move to a compliant firm (Pacifica, Backmont), the loss of the ability to pension-split 401(k), as well as loss of the ability to withdraw 401(k) monies without penalty before 59.5 could cause problems, particularly if, as many Cdn workers did, only one spouse worked in US. Add that to their fee-based advice....

Keep us posted; I'll do the same.

[coco1106]

thanks Nelsona ,

If fidelity force us to close the acct that will be the end of our plan to move.
there is no way we could take the tax hit and survive, my husbands plan was to stop working at 55 and live from our savings in the bank, then take money from IRA down the road, but if we get hit with all the taxs and plently , then I know we will not be able to move back home.

Its all kinda up in the air, hoping fidelity will at least let us maintain a retirement acct with them, even If it can just sit there re-investing dividends in an index fund....hoping for this.

thanks again for your input.

[nelsona]

Well, as Phil pointed out, you could move these accounts to a cross-border compliant broker with little problem, other than the ones I mentioned , and certainly no tax or penalty.

[coco1106]

Thankyou