USC, Canadian resident, Canadian spouse
Considering at retirement, buying an annuity with my US 401K, with spousal benefits ( benefits paid till death of both parties ).
Looking at this partly because with Fidelity, anyway, with a Canadian beneficiary of 401K, upon my death spouse would have to collapse it and take lump sum payout and associated tax, vs continuing to receive the annuity payments which would be taxed a lower rate over time.
Any reason NOT to do this? ( I am aware of the issues with annuities in general ).
I have been told that such annuity income would not be eligible for pension splitting, but other posts here seem to indicate CRA would in fact allow it, which would be another reason to take this path.
Converting 401K to annuity, USC / Canadian resident
Moderator: Mark T Serbinski CA CPA
Re: Converting 401K to annuity, USC / Canadian resident
Interesting, complex question. I can only add the complication that you can split the income distributions from the 401K with your spouse, which would not be the case if you rolled the 401K into an IRA. Distributions from an IRA can't be "pension split" under CRA rules
Of course, you could move to a Roth IRA, in which case you would owe no taxes to either CRA or IRS when taking distributions...assuming you file the proper paperwork to CRA in the time frame, and make no Roth contributions while a Canadian tax resident.
Of course, you could move to a Roth IRA, in which case you would owe no taxes to either CRA or IRS when taking distributions...assuming you file the proper paperwork to CRA in the time frame, and make no Roth contributions while a Canadian tax resident.