RRSP, Retirement strategy

Hello,

I am new to this forum. A lot of info here which is nice.
I have a few questions, sorry if they are basic ones. I did search on the threads and found part of answers but wanted to ask more specifics...

1. I currently hold a RRSP in Canada. When becoming a US resident (and a Canadian non-resident), I know the RRSP can be left untouched and will not be taxed by US and that I won't be able to contribute to it. But when I cash it out at retirement age, how is it taxed ? Both Canada and US ? Only Canada ?

2. Knowing that there are chances that I will go live in the US in the future, what is the better approach as a retirement strategy ? Is it better to stop using a RRSP right now ? Should I use non registered investments ? I have 25 years before retirement age, and it stresses me out not to be sure if I do the best or not...

3. Let's say I open a Non-Registered investment in Canada with a broker. I grow money in it, collect dividends etc... Is there any problems to move the money to a US account when I become US resident ?

4. Is there an equivalent to the Canadian TFSA in the US ?

5. My wife has a little bit of money in the US standing still. She is a US Citizen, Canadian resident. Can she open a non-registered investment account in the US ?

Thanks a lot for any help.
Fab

well it won't be touched by the IRS, BUT depending on what state you live in it could be taxed--so I'm told! I am in Virginia and they dont touch them. But have heard others in other states say they were not so lucky!

One has to report their RRSP's to the IRS using form 8891

1. I currently hold a RRSP in Canada. When becoming a US resident (and a Canadian non-resident), I know the RRSP can be left untouched and will not be taxed by US and that I won't be able to contribute to it. But when I cash it out at retirement age, how is it taxed ? Both Canada and US ? Only Canada ?

It's treated as an IRA essentially, file Form 8891 after you move your tax home to the US, so any US taxes that apply to withdrawals on IRAs would apply to your RRSP. Because your tax home is in the US at that point, there are no Canadian taxes.

It is actually possible to contribute to it after you've left (because you carry on via an IRA) but I'm not aware of any Canadian institution as yet that's set up to do it, in fact most of them don't seem to be aware the beneficiary can be a US resident as the tax treaty only changed last year.

2. Knowing that there are chances that I will go live in the US in the future, what is the better approach as a retirement strategy ? Is it better to stop using a RRSP right now ? Should I use non registered investments ? I have 25 years before retirement age, and it stresses me out not to be sure if I do the best or not...

Well that's more of a general question about whether RRSPs are a sensible investment strategy, but as the tax treaty stands right now it doesn't really matter which side of the border you are on, provided whomever you have the RRSP with knows how to deal with US beneficiaries. 25 years from now I'm sure they would.

3. Let's say I open a Non-Registered investment in Canada with a broker. I grow money in it, collect dividends etc... Is there any problems to move the money to a US account when I become US resident ?

Not really, in fact there may be no reason to move it. You have to use a broker registered in the country where you reside to do the transactions. Obviously dividends and so on would become subject to US taxes but they're generally lower.

4. Is there an equivalent to the Canadian TFSA in the US ?

I don't think so, the TFSA is based on the UK ISA. A 529 is the equivalent to an RESP. There are tax-free or low tax investments, for example if you invest in municipal bonds in a State where you reside but it's a much more complex picture than Canada, because the tax rates are different. Currently the CGT is 0% below a certain level, so everything is tax-free in that respect, there's no need for something like a TFSA because the CGT kicks in around $30,000 and something IIRC if you invest in something that has no income.

5. My wife has a little bit of money in the US standing still. She is a US Citizen, Canadian resident. Can she open a non-registered investment account in the US ?

Yes I think so if I understand you correctly because it doesn't take advantage of any part of the US tax code, it's just a regular investment. But she'll pay Canadian taxes on it, e.g. income tax.

Thank you very much for all this info!

It's treated as an IRA essentially, file Form 8891 after you move your tax home to the US, so any US taxes that apply to withdrawals on IRAs would apply to your RRSP. Because your tax home is in the US at that point, there are no Canadian taxes.

Steve, what about the with holding tax on the RRSP distributions??
Are you saying that if the tax home is in the US, Canada will not with-hold taxes at the time of distribution?

Thank you for clarifying this for me...

If you are taking periodicc withdrawls from your RRSP as a US resident, you will have 15% Cdn tax withheld; lump-sums will be withheld 25%.

Us tax will be determined by you, based on what the RRSP was worth when you came to US.

Soon I will be moving to the US from Canada after 30 years in the federal gov. I would like to maximize my money transfer potential, which will include my pension rrsp's and maybe some mutual funds. To my credit I will have a USA full bred American wife and I presume US address. What should I do to hold on to the most funds as possible and still afford a house on the Delaware coast. Thank you.