RRSP Question on Old Account

[LostGirl]

Hello folks, my US Resident, Canadian husband has some RRSPs from his time working in Canada. He's clueless on how they operate (but bully for him for setting them up)! We get quarterly statements from BNB Bank and he rolls them over each time they mature.  They must be bond based because the return is dismal but whatever, its not a ton of money and I count them as bonds in the portfolio. 

I have questions about how you access the funds. This may be super elementary to native Canadian's like I 100% understand 401Ks and Roths but RRSPs are confounding me.  Below is my understanding of how they work/are accessed, can anyone confirm I got it right or add some clarification?

1. You can withdraw from it anytime but will have to pay taxes. I guess this would be when it matures and before it is reinvested.
2. The taxes are on a sliding scale based on how much you withdraw with the lowest level being 5% in QC and 10% elsewhere in Canada.
3. We live in the US, which of the rates would apply? My husband was only ever is resident of QC but obviously does not live there now. Is there any other Canadian tax applied to this if we don't have other Canadian income.
4. The only thing I can see about when you can withdraw without that penalty is after 71 years old, this feels very late. What is the age at which you can withdraw without penalty?
5. Lastly, Is there a better way to manage these? A Canadian brokerage, etc? 

Thanks for the help MMMers! I'm just trying to clean up our accounts and this is the last set that confounds me.

[Prairie Stash]

RRSP is a 401(k) with a few nuances.

1. You can withdraw from it anytime but will have to pay taxes. I guess this would be when it matures and before it is reinvested.
Its counted as income, you will pay regular income tax to the IRS. You may be paying 25% to the CDN government.

2. The taxes are on a sliding scale based on how much you withdraw with the lowest level being 5% in QC and 10% elsewhere in Canada.
That's the withholding tax, its just a token amount upfront so that you don't get a large tax bill. Do not worry about QC anymore, its no longer relevant.

3. We live in the US, which of the rates would apply? My husband was only ever is resident of QC but obviously does not live there now. Is there any other Canadian tax applied to this if we don't have other Canadian income.
You don't pay to the province it was started in. You only need to worry about federal tax at this point.

4. The only thing I can see about when you can withdraw without that penalty is after 71 years old, this feels very late. What is the age at which you can withdraw without penalty?
Any age. We don't have age rules. The only penalty you face is don't withdraw when you have high income cause it boosts your income...

5. Lastly, Is there a better way to manage these? A Canadian brokerage, etc? 
Questrade. A self directed brokerage account.


Thanks for the help MMMers! I'm just trying to clean up our accounts and this is the last set that confounds me.

This artcile explains steps for getting the money, possibly without paying tax
"In some unique situations, former residents of Canada might be able to file a Canadian income tax return as a non-resident under Section 217. Filing a return under this election allows a non-resident to file a Canadian tax return if it would be beneficial for them to do so. In this case, the non-resident taxpayer would be able to claim the same deductions and credits as that of a traditional Canadian taxpayer. There are limited reasons for a non-resident to make this election. One reason is when an individual has a non-working spouse in the U.S. with, for example, $50,000 in their RRSP. In this case, the individual could withdraw the RRSP tax free over five  years without paying any Canadian income tax."

https://cardinalpointwealth.com/2017/02/02/income-tax-implications-of-rrsp-withdrawals-as-a-non-resident-of-canada/

[LostGirl]

Thanks for the point by point response and the link. It is MASSIVELY helpful :)

[Goldielocks]

It sounds like you just want to get the money under your control.

Tell BNB that you are US citizens, and want the tax treaty withholding rate for the USA.  You may need to just provide your address or file a form.   Some banks are automatic based on your address.
Sell your investments, and ask for a cash payout. 
You will pay withholding tax (it is automatically taken off before you get the cash).   It is 15% for Canadians from the USA, and usually reciprocal rates apply between countries.
You can use the money to put into your Roth, IRA, or whatever you like.

When your partner files taxes, they will get the tax deduction if they put $$'s into an IRA.
 There is a part of the tax return where you enter "Foreign Taxes Paid" where you enter the amount withheld by BNB when you took the cash.  <-- this is to ensure you are not doubly taxed.   Hopefully your highest marginal tax rate is at least the 15% or withholding rate Canada applied to it.


NOTES
-- if you get a cash payout, you need to figure out how you will get the $$'s.  Wire transfers tend to be expensive on both the outgoing and receiving side.   I think I paid close to $75 by the time I was done moving my money between US and CDN accounts using foreign wire transfers.
-- Wire transfers over $10k will require additional paperwork for proving no money laundering is going on.
-- If you are letting this "roll over", you may have GIC's or even older Government Bonds rather than a bond mutual fund or Bond ETF.   These types renew on a specific date, so you need to wait until your renewal date to do this.  Tell you bank to hand over cash instead.  (Pay them out to you).  Sometimes you can set this up ahead of time so that you don't miss the window.

[LostGirl]

Thanks @Goldielocks ! What is a GIC?  You are correct that I just want one less thing to deal with and we currently don't even have online banking setup for this account.

They do mature on a specific date but the bank asks how he wants to reinvest each time (different maturation periods, not a lot of options) so we will pull it out at that point.  Unfortunately, we are definitely over the 15% marginal tax rate. 

We are planning on doing a temporary expat stint in 2019 so I'm trying to streamline things when we wont have a huge desk for paper sorting, etc.  Thanks again!

[Goldielocks]

Guaranteed Investment Certificate.  Banks issue them for terms fromo 1 to 5 years, and provide a pre-agreed, set rate of interest.   The classic type only let you redeem them on the aniversary date, and they are not sold on the secondary market, so you are locked in (unlike a government bond that they closely resemble).

The interest is guaranteed both by the bank, and insurance on the bank's deposits, too.   Interest is higher than government bond and savings accounts, but much less than most corporate bonds.