Canadians Living in the U.S. -- When to Withdraw Canadian Retirement Funds?

For Canadians working and living in the U.S., it is generally not advisable for them to rollover their Canadian RRSP/RIF into a U.S. IRA or other similar retirement plans.

Under Canadian law, such a rollover will be considered a distribution that is subject to Canadian taxes. The US-Canada Income Tax Convention also does not allow a deferral of U.S. taxes for a distribution of RRSP funds, so you would be taxed in the United States as well. Under the U.S.-Canada Tax Treaty, the US will give you a credit for any tax you paid in Canada.

The general rule for tax minimization is that you would withdraw funds from Canadian RRSPs only for the years when your income would put you at a lower tax bracket, i.e. during retirement, or when you are required to withdraw those funds (at certain ages under Canadian law).

In terms of estate planning, the US-Canada Tax Treaty does not allow Canadian tax paid on an RRSP withdrawal to offset U.S. estate tax. If this is a concern for you, this may impact your decision on whether to withdraw your Canadian RRSP sooner rather than later.

Author: Angeline Gallivan

Disclaimer: Information provided on this website is provided as a courtesy to you and does not constitute legal advise applicable for your unique circumstances. Your use of any information provided here does not create a lawyer-client relationship between yourself and our lawyer. To obtain advise specific to your legal situation, please contact us at 289-291 3977 or info@changallivanlaw.com.