US Social Security deposit to US vs Canadian bank

[nelsona]

Indeed the exchange rate you get thru a forex company will beat the Cdn banks (and the US banks of course). However the exchange rate the SSA offers may be actually better than even forex, and it means you don't have to worry about transfers (or having a US bank).

[ND]

RE the Cdn bank charging your dad for each incoming wire transfer, I bank with TD and their NJ USA bank charges USD$15 for each incoming wire transfer and Toronto branch charges CAD$17.50 for each incoming wire transfer. However, when payers use my ACH info to make direct deposits into my accounts there is no charge.

Another life hack I use is getting US people to write a check and e-mail pictures of front and back. Then I use TD bank app to deposit by reading those pics. No mailing of check required, writer can destroy it.

[MaggieA]

Clever about the check pictures, ND. I don't have people sending me personal checks from the US, but it seems like an excellent tip for those who do.

Just to reiterate nelsona's extra comment about not needing to have a US bank (if you get US SS direct-deposited to a Canadian account). After helping my late parents in their 80s, I think everyone should know that it's important to simplify financial and other affairs as people get really old. It's fine to rely on doing ad-hoc online transactions to move money between currencies every month when you're a sharp 60-something, but even seniors who aren't suffering cognitive decline tend to become less capable with their devices in their later years. (I expect awareness of this problem will increase as boomers get into their 80s). If you are living in Canada and need your US SS to pay your Canadian bills, eventually, if you are long-lived, it will be a blessing to have the US SS showing up automatically in your Canadian bank account. At that point you likely won't be traveling, and your US and foreign exchange accounts will fall into disuse. If you or your kids are smart, you'll get rid of the ones you don't need. It'll reduce your fraud risk and make life a whole lot simpler for your eventual heirs.

[nelsona]

That is a very good point Maggie. Those who have earned an SS check, likely have US pensions, too. Most US pensions won't direct deposit to Canada, so those will need need a US bank account.

But, I will note that for my spouse, so she can do that 30 years from now, when she's in her 80's ;o)

[18thrabbiy]

As a dual citizen I have been transferring funds bidirectionally for over 29 years.

I used to use the ability to transfer (either direction) in real time by using the service of some banks to transfer sums between their US domiciled US accounts (say at RBC USA bank) and the Canadian domiciled (US or CAD) accounts. In the cause of RBC the problems were the inability to auto schedule transfers, and the "vig" which is deviously hidden inside the exchange rate offered and runs at about 3% to 5%.

For some time now I have been using WISE (formerly Transferwise) a payment FIintech, with what the call a multi-currency account. They can autoschedule, and their vig is much lower (less than 1%). In addition they offer a debit card that autoconverts between the available balances you may be keeping, regardless of the currency your are spending in out the country you are in.

I prefer to receive pension and/or/investmentt or other receipt in the local currency in an account domiciled in the country of that currency (i.e. US domiciled for US SSA). That simplifies having to deal with witholding and tax issues as well.

[yoyomum]

The form SSA 1199 CA specifies the Royal bank as the option to choose if you want your SSA deposited in US $ to a US Bank account. Why does it specify the Royal Bank? We have a US BMO account. This is confusing to me. (We live in Canada).
My first US SSA deposit was successfully made into my CAD BMO USD account, but not my husband's. It somehow got rejected. So, now we want to try to have the deposit go to the US BMO account in USD.
What am I missing? Any suggestions? Also, phone wait times are very high so we want to have all of our ducks lined up before phoning them (again). Or, can we just fax the information. ANY help is appreciated.

[MaggieA]

You are misreading the form. It does not specify the Royal bank as "the option to choose". It offers 3 options, labeled A, B, C, as follows:

A. U.S. dollar account at Royal Bank of Canada
B. U.S. dollar account at any other financial institution in Canada
C. Canadian dollar account at any financial institution in Canada

If you want the money deposited to your U.S. dollar account at BMO, then you fill in section B.

"Why does it specify Royal Bank?" From the fields on the form, it looks like the coding for accounts at Royal Bank is a bit different, so they had to make a separate section for that bank. But if you don't bank at the Royal, just fill out section B instead. None of the 3 sections is more recommended than the others.

You can just fax the form. That's what I did and it worked fine. See my previous comment on the previous page. I also provided there a link for finding the fax number to use.

Also, I'll say again, if you are ultimately going to convert this money to CAD, the very best rate of exchange you can get is the one that SSA gets themselves. It's a better rate than BMO will give you for moving the money from your BMO USD account to your BMO CAD account. If that's what you're doing, just get SSA to deposit to your BMO CAD account (option C on the form). It will give you more money.

[LJBill]

My experience:

I am a US citizen residing in Canada as a PR since 2021. I applied for my Social Security retirement in mid-2022. Initially I had direct deposit go to my US Bank (which just happened to be RBC Bank (GA), the US subsidiary of Royal Bank of Canada). It only took me a few months to see the benefit of having it sent directly to my Royal Bank of Canada chequing account, deposited as CAD$.

+ The exchange rate that the US Treasury obtains can't be beat. I save quite a bit versus even Wise and IBKR. (The costs of exchanging and sending cash via Royal Bank and Fidelity are just too high.)

+ As a foreign deposit my benefit is deposited around the first of the month, rather than the rule for domestic direct deposit as being based on when my birthday falls in the month to determine what week of the month you get your deposit.

+ Since collecting Social Security benefits is planned to be a "long range project" having the cash go directly to where it needs to go for living expenses is the most convenient, hands-off, trouble-free mechanism I can think of.

+ Even submitting the change of venue form for the Canadian bank direct deposit was very simple and easy, and it took effect quickly. As I recall I had to mail in the form but it was received and acted on quickly. (okay, my notes indicate that I sent by mail but later called with some unrelated questions and while I was at it I asked the guy about the change of bank. He said "no record of that" but he took the information as well. In any case, it was acted on expeditiously.)

[yoyomum]

Thank you for these responses. The form you used to change the deposit was the 1199? Did you fax it to your closest US Social Security field office or did you fax it to the national number. And just to confirm, the very best exchange is from SSA to your Canadian CAD account. I had thought that moving the money from BMO US Checking to BMO CAD US checking account and then converting to BMO CAD CHECKING would be the best exchange rate, but this seems like I was mistaken. I hope it all makes sense. The reason I am a bit cautious is because when we actually got through on the phone with somebody at SSA, they told us we had to return to Wenatchee, which is our local field office to make any changes, which, of course is incorrect, but it just made us Want to really get the fix right.

[yoyomum]

So, we will go the BMO CAD route in CAD dollars. Did you fax the info to your local field office of the national office? Thanks.

[LJBill]

@yoyomum:

I submitted form 1199-CN for setting up direct deposit to my Canadian bank. Per the instructions on the form it was sent by postal mail to the "local" office for my location in Alberta, which is the Office of Earnings & International Operations branch in Great Falls, MT. Do not send this to the main OEIO in Baltimore (unlike the form for withholding).

As mentioned, guy in the MT office indicated they hadn't received my Form but the main office had received (and acted on) my form for withholding sent on the same day. But he obliged by taking the information over the phone and my next payment went to my Canadian bank.

Having the benefit sent to my Canadian bank is surely the cheapest and most effective way for me of getting this cash transferred. Even letting the cash build up for months in the hopes of getting a discounted fee on exchanging the larger amount is not worthwhile, just not going to beat the rate that the Treasury gets.

I stay away from exchanging larger sums through my banks, they don't compete with Wise forex.

[MaggieA]

I faxed the national office. This was in late 2022. Actually I did this after trying to work through my local office, which for me is in Bellingham, WA, but that didn't seem to work. So YMMV, honestly. Anyway, thanks to LJBIII for confirming so eloquently that getting direct deposit from SSA in CAD gets you the best exchange rate, by far.

[worryfreeinvestor]

Thank you for this discussion. Can I turn the direction around? I have a friend who is a US resident who receives Canada Pension Plan and Old Age Security monthly. He receives the deposits into a major Canadian bank in Canadian dollars. He has a US dollar checking account at the same Canadian bank. He exchanges the Canadian dollars for US dollars and deposits the US dollars into that US dollar checking account at the same Canadian bank. He possesses a check book for that account at his home in the US. He writes a US dollar check to himself and uses his US bank's app on his phone to deposit the US$ check (drawn on his Canadian bank's US dollar account) via a photograph. Complicated, right?

As noted, the Canadian bank takes a lot of vig from the currency exchange. However, writing a paper check, photographing it, and depositing it to his US bank costs nothing (except the time fiddling with the smartphone) while a wire transfer would cost $60 (or something like that).

My friend just discovered that "My Service Canada" can deposit those deposits in US dollars directly to a US bank at the Bank of Canada exchange rate. My friend has two questions.

1) He figures this would save about 4 cents per dollars on the currency exchange: Is that about right?

2) He receives two NR4s from the Canada Revenue Agency annually: One for CPP and one for OAS. He uses those to calculate his US taxes due on the income. However, he does not believe the CRA shares the NR4s with the IRS via a software vendor, like a US payer would. (For example, an employer's payroll processor shares the employee's W-2 with the IRS, and a broker dealer or IRA custodian shares 1099s and related forms with the IRS.) Is his understanding correct and if he chose direct deposit into a US bank for his CPP and OAS what impact would this have on the CRA's transmitting this information to the IRS?

[nelsona]

1. Probably. No bank in Canada give Bank of Canada rate on such small exchanges. And much simpler than what he is doing now. This process is well known here.

2. No CDn payor shares info with US software makers. They barely share with CDn software makers. Besides, the US software wouldn't know what to do with the NR4 anyways. But it would have no effect on what CRA sends to IRS, not should it lead one to believe that reporting the income would somehow change. Besides how a payor transmits the info to a software firm, and how it transmits it to IRS are COMPLETLY independent processes.

AS you, or more importantly, your friend may know, CPP and OAS are reported on the social security line on the 1040 (the software will determine the tax rate bases on other income. One has to trick the software by creating a 1099-ssa with the information. CPP and OAS are not taxable in canada to US residents.

Both CCP and OAS are considered CDn-source general income, for foreign tax credit purposes. If the is left over Cdn tax from previous 1116s, it can be used on that year retrun, even though no Cdn tax is due on that income.

[BeaconHillWealth]

Most my clients either have their US SS deposited into their Canadian based USD bank account or USD US based back account. They often leave the amounts in USD to spend while in the US.

However, if you do need to convert try to stay away from using the big Canadian banks. The spread they charge is massive. Likely not a big deal for smaller conversions, but if you're converting larger sums of money try to your RIA to help with the conversion. For example, we get rates close to spot for client accounts.

As an example, if you use the national bank rates the current spread is over 700 basis points....gross

Hope that helps.

Phil


MaggieA wrote:
> US/Canadian dual citizen living in Canada, planning to retire this year and
> start collecting SS. Looking for advice on getting my SS payments directly
> deposited to a Canadian bank, vs sending them to our US bank account and
> then writing checks to move the money to Canada. Spouse is already retired
> and at the time he retired we didn't know direct deposit was an option, so
> his SS payments go to our US bank. I'm thinking that since I need to spend
> the money in Canada, it would be simpler to get it deposited directly to my
> Canadian chequing account. Pros and cons? Are there fees associated with
> this? Re fees, my late dad had a small pension from the New Zealand
> government, and BMO dinged him $14 wire transfer fee on each monthly
> deposit. If that happens with US SS deposits then I'd prefer to send the
> money to our US bank. I haven't succeeded in getting an answer on this from
> the bank, so wondering if anyone here has experience.