Author Topic: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth  (Read 4100 times)

coco1106

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us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« on: January 15, 2019, 11:12:29 PM »
Hi
Me and my husband are dual citizens usa/canada, planning on returning to Ontario next year, we will be keeping usa citizenship.
We will both be 55 when we go back.
Husband does not intend on working in canada
All our family is there and we feel its time to spend more time with them.

One of   our main concerns is how to treat our Fidelity accounts, he has $1MIL 401k,  150k roth   I have 530K IRA  and 100KIRA, plus we  have 350k in taxable acct, taken 25 years of hard core saving and very hard, also we own our home,no mortage, I have zero on the cc.

I have really no idea what we have to do with our Fidelity accts  when we leave, after reading and doing a bit a research, I am not certain in Fi will allows us to keep the accts open in we residents in Canada, I read horror stories were the firm liquidated assets and took 30 % tax , then the monies would be taxed again Canada ???? we have a meeting next month with a Fidelity rep, but they told me that they are not licensed to serve non US residents due to the law, so this is worrying me alot !
I read a few comments about Ameritrade and Charles Schwab, that they are licenced for usa and Canadian trading, and IRAs can be moved over ..hope this is ture.
 I have made a appt with a cross boarder tax,investment specialist in Ontario, also I have a appt with royal bank of Canada who said they deal with people like us, moving from usa to canada.
I know we have to file usa tax forms for ever as well as Canadian
 The last thing I want to do is make a mistake as far as the retirement account go, I have literally had many,many sleepless nights over this , I am so happy to be going back for family, but then I get so over whelmed and stressed , I dont let my husband know since its all his family , he is so excited and happy, but its me who worries for both of us, if anyone else moved back to Canada with all the us retirements accounts, any information would be so much appreciated....thank you xx 

nereo

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #1 on: January 16, 2019, 09:20:14 AM »
When we lived in Canada I had no problems keeping my retirement accounts with Vanguard.  I am not certain about Fidelity but I cannot fathom why they would force you to liquidate your holdings (I don't believe they can, legally).  I had my mailing address and statements all in Canada and there were no issues.

I would first call Fidelity directly and tell them that you are temporarily* going to be out of the country, and if that will change anything with your accounts.  If you are not satisfied with their policies, you can do a direct transfer (non-taxable event) to one of hte other brokerages, like Vanguard, who will be more than happy to have your business.

MANY ex-pats I know kept their bank accounts and investments in the US.  What you may NOT be able to do is make additional contributions while living abroad and with no taxable income.  You will remain eligible for SS payments provided you have met the minimum 40 credits (generally accomplished with just 10 years work history within the US).

The US and Canada have a tax treaty which prevents double-taxation in most cases. I have no idea why a brokerage like Fidelity would tax your existing accounts 30% and liquidate them, and I strongly suspect that is not the case.

You only have to file US taxes if you retain your US citizenship.  You can renounce your citizenship if you like and be freed from that 'burden' - though why one might do that just to escape filing a few forms each year is beyond me. Just sayin'.

Finally, if/when you start moving savings from $USD to $CAD I highyl recommend that you learn and understand how to execute Norbit's Gambit.  It can save you a ton of money on large asset transfers.  Canadian Couch Potato is another great resource for Canadian-minded personal finance issues.

*all moves are temporary, as are we :-)

FLBiker

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #2 on: January 16, 2019, 01:26:47 PM »
We're American citizens who are moving to Canada in the next year or so.  I haven't spoken to Fidelity yet, but I can tell you that Vanguard is not supportive of this.  They may well have been in the past, though, as I believe the issue is caused by recent tax laws.  I was told by Vanguard what once I updated my address to a Canadian one, my account would effectively be locked.  I can't tell you the exact details (apparently messages are deleted automatically from Vanguard after 1 month) but I know that new investments / exchanges would be restricted.

I'm planning to move stuff to TD Bank / TD Ameritrade as they seem well-versed in this type of cross border stuff.  And I've been told that switching from Vanguard mutual funds to Vanguard ETFs (in my taxable account) shouldn't trigger capital gains taxes.  I haven't done it yet, though.

nereo

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #3 on: January 16, 2019, 01:49:51 PM »
We're American citizens who are moving to Canada in the next year or so.  I haven't spoken to Fidelity yet, but I can tell you that Vanguard is not supportive of this.  They may well have been in the past, though, as I believe the issue is caused by recent tax laws.  I was told by Vanguard what once I updated my address to a Canadian one, my account would effectively be locked.  I can't tell you the exact details (apparently messages are deleted automatically from Vanguard after 1 month) but I know that new investments / exchanges would be restricted.

Yes, they can restrict access to accounts while you are living abroad, but this is very different from what the OP was talking about (forced liquidation with a 30% penalty).

I believe what you are referring to is the Foreign Account Tax Compliance Act which has indeed added a lot of complexity.
There is more information on it here: https://www.irs.gov/businesses/corporations/summary-of-fatca-reporting-for-us-taxpayers

One strategy often used (and which I used without realizing it) is to maintain a US address that is not a PO Box. We used your parents address. This can be useful not only for your brokerage but also for maintaining things like US credit cards, cell phone plans (should you want to).  Also, Schwab and TD seem more friendly to US Expats living abroad than Fidelity or (more recently) Vanguard. This gives you the most flexibility if it is an option to you.  Tax implications do not change as long as you pass either hte physical presence test or the bona-fide residence test.

Novik

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #4 on: January 16, 2019, 01:56:44 PM »
Dual citizen here - although I was born and raised in Canada so have never executed a cross border move, I deal with many related complications.

@nereo you are correct that FATCA changed a lot of things, and many banks and brokerages have stopped letting expats open/use accounts. But I have also read horror stories where accounts were forced to be closed and the owners struggled to find someone else who would let them open a new account, so maybe that's where liquidation happened.

I suggest those moving check out Interactive Brokers if they're looking for a discount/DIY brokerage, since IB advertises as expat friendly (although if you're already in Canada, they won't let you open a US domiciled account, so do this before you move).  [no affiliation of mine here]

Also due to FATCA, filing US taxes while living outside the country can be a HUGE burden, less because of the forms, than because of the punitive taxes if you attempt to use "foreign tax havens". Only the thing that's a foreign tax haven to the IRS is known to me as a TFSA, a Canadian mutual fund, or a Canadian ETF.  @coco1106, since you're in drawdown rather than accumulation, this should be less of an issue for you, but be wary nonetheless.

I suggest reading a book like "The American in Canada" for a comprehensive review of your situation, so you can be well-informed and armed before/while meeting with the professionals to help you make the move. And as always, trust the professionals you pay a fee to more than anyone who will earn commission/% off you.

coco1106

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #5 on: January 16, 2019, 07:00:47 PM »
Thank you all for the great information.

I called Raymond James today they have advisers who are licensed in usa and Canada and are able to manage USA IRA/roths .
They told me I could transfer our IRA to Raymond James,while being a canadian resident.

We do not intend on using any of the funds, and will not make contributions once we move, we just wanted a brokerage firm that would allow us to maintain them.

of topic, may I ask which moving company you guys used or will use for your move to Canada,
thanks again

coco1106

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #6 on: January 16, 2019, 07:05:19 PM »
   ASLO,
  I called charles schwab, explained my situation, they said yes they can help me today, next month , even in 6 months, but they may not be able to maintain the usa IRA next year?????? if the policy changes for their company, I was totally confused by this information, and decided not to ask any more questions.

after researching Raymond James I felt they were more friendly to non residents with IRA.

Goldielocks

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #7 on: February 08, 2019, 03:09:19 AM »
TD and another bank (or two?) will do the extra filing for you to hold active 401k / ira accounts.

Before you go, I would convert whatever you can to a regular IRA, because the tax treaty laws name IRA's but not 401ks, which gives you a bit of an advantage.

Also, sell all of your US positions in non-reg. that have a loss position, so you can maybe get the capital loss on your taxes or hold it for future tax returns.

I think one option for you is to take regular distributions from your IRA / 401k, and have them paid out per normal at age 59.5.   Similar to his receiving a SS cheque.   Regular distributions are protected by the tax treaty as pensions.   

If you have income in Canada, and pay income tax, you should be able to roll over your IRA into an RRSP, with minimal to no tax net tax loss, including the penalty.  Talk to an accountant.  I did this, and it was a pain- you pay US withholding, and claim it back at year end  on your CDN tax form as foreign taxes paid, You also claim the money as income in canada, offset by the rolling it into your RRSP...then get the RRSP deduction plus the foreign taxes deduction... but you also have to make up the drop in funds (top up your $$ put into the RRSP) for the US withholding in the meantime.   You don't get a tax credit (cash back) for claiming "foreign tax paid" AKA your US withholdng-- only an offest on current year CDN taxes paid, so you need to have a fairly high CDN tax bill.

I had a Wells Fargo account and they were just fine with my IRA after I went to Canada, until around 2010, when they froze the account.  I did not have to liquidate, but freezing it royally sucks!  It was frozen (no buy or sells) until 2015 when I rolled the funds into my RRSP.  That is when I called around and found only 2 possible companies, including TD who would do the dual filing work for Canadians with US domiciled IRAs... I was already in Canada and it was a bit tricky to get all the forms completed to move it as their location was far away, so I just waited a couple of years and then with a cdn tax change in my favor, I moved the money.

The new tax change?  If you are charged a 10% early withdrawal penalty, you can now claim that as "foreign taxes paid" on your Cdn return, too.   For some reason I was not charged this by the bank, only the standard withholding.  This could be because I firmly requested only 30% to be withheld, or because there is some debate if the 10% penalty should apply to people that become non-resident.


« Last Edit: February 08, 2019, 03:15:33 AM by Goldielocks »

nereo

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #8 on: February 08, 2019, 05:54:39 AM »
another option which we utilized was to recharacterize our tIRA into a Roth IRA while we were living in Canada and had no US income.  WIth the standard deduction of $12,200 you can convert that amount each year and pay the 0% taxes owed.  It's basically establishing a Roth pipeline.  This works as long as they do not freeze your accounts.

coco1106

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #9 on: February 08, 2019, 07:27:36 PM »
 
  thank you for the information,

 We are really hoping Fieldilty will let us maintain our pretax retirement accts, I did call raymond james they said they could maintain the funds, apparently raymomd james in Canada has a US platform that specializes in cross boarder accounts IRA, roths etc.
also RBC located in USA will maintain the finds, which may work out ok since we are thinking of opening a account with RBC in canada, they have a newcomers acct and US/CDN cross boarder acct.

we have meetings set up with the mentioned firms, like I said it would make life alot easier if Fidelity would just keep all our accts.  ( I have read horror stories of firms threatening to liquidate accts once you change your address to Canada) 
I dont think we would flip over to RRSp, we are not planing on working once we move, going t live off our after tax accts for 5 yrs then when we are 60 we will start withdrawing from IRAS........lots to think about and figure out, but I know we are not the first ones to go through this , and I really appreciate all the great comments.   

salt cured

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #10 on: March 20, 2019, 09:05:57 PM »
Bumping to ask if you've found any more answers. I'm seriously considering moving from the US to Canada (also a dual citizen) and am facing a similar situation with retirement and brokerage accounts.

gerardc

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #11 on: March 20, 2019, 09:14:56 PM »
Last time I asked Vanguard, they said for a Canadian address they'll freeze the account (can't buy/exchange/convert/rollover anything or add money) but you can do partial withdrawals.

All depends on the address they have on file for you, which should correspond to your residence address for tax purpose so that correct withholding is applied. If you're a US citizen you can then file form W-8BEN with them so they don't withhold taxes on your dividends.

Check out this link too if you're confused about all the possibilities:
https://moneymattersforglobetrotters.com/what-should-i-do-with-my-us-investment-accounts-when-i-move-overseas/

salt cured

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #12 on: March 20, 2019, 10:32:19 PM »
All depends on the address they have on file for you, which should correspond to your residence address for tax purpose so that correct withholding is applied. If you're a US citizen you can then file form W-8BEN with them so they don't withhold taxes on your dividends.

I had assumed that distributions from a 401k or brokerage account held in the US would be taxed in the US, regardless of country of residence, but maybe that's not the case? I was hoping to hold all my investments and most of my cash in the US and to maintain my savings accounts and credit cards there and only use a Canadian checking account for convenience (paying rent, receiving any wages I might earn, etc.). It would seem pretty easy to provide these institutions with a US address while in Canada. But I'm not sure what unintended consequences that might have.

Goldielocks

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #13 on: March 21, 2019, 11:02:21 PM »
You are correct.

You then get a foreign tax credit for us taxes paid.  If you file a us return you could claim extra taxes back, if there are any.

The only twist is that you file paperwork in advance stating to withhold (us taxes) the percent per Canada us tax treaty.

It isn't all that easy to have a nonPO box address in USA unless you have family there and are ok with twisting the truth.  At least not for more than a year or two.  Banks figure it out, often.  The only impact though is that your investment account is frozen for trading, but you can sell all and close the account.

coco1106

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #14 on: March 26, 2019, 07:47:40 AM »


  update

   We have a meeting set up with RBC( usa) who have informed us that we can transfer IRA,roths and also rollover husbands 401k into a IRA while we are still residents of USA, as soon as he leaves his job we will start the rollover process.

This summer we will transfer (direct transfer) IRA ,roths to RBC (usa) ..........next time we are in canada we plan on opening a cross-boarder account with RBC in ontario, we will only deposit $1000 in it, I called them and they told me US residents are able to open accounts, I explained that we are planning on moving summer 2020, manager said no problem , and a few weeks before the move we can talk about money transfer for the purchase of our new home in ontario, she said since we will be customers of RBC in USA that would make things alot easier. She said we would also get a RBC visa card , without a problem since we will already have a RBC visa from USA . We plan on living on savings for 4 years after which time we will both be 60, then we can use funds from our roths...........btw you have to file a paper the first year you are in Canada with regards to keeping roths tax free...

I have a appt with a cross boarder tax specialist in Ontario this summer , just to discuss everything for the move.

We are currently with Fidelity, each time my husband asks for information with regards to being a non US residents he gets conflicting information !!! we have meeting with them in june, but I think we have decided to switch to RBC, we will not have a USA address once we sell our home, and RBC said this is not a problem.

I think someone mentioned W 8BEN, I was told this was for NON USA citizens only...we are dual citizens, we were told we would have to file  W9 to the canadaian RBC, basically telling them our SS#.

I dont really know much about investing etc, but I know you cant have certain investments if you are a non US residents, we just want to keep things as simple as possible, the RBC usa informed us that we can still invest in EFTs , basically husband said if we can get 2-3% we are good !! 

We are dual citizens, we do have a Canadian SSI # which needs to be activated upon arrival in ontario, also OHIp card has to be activated which takes 3 months.

sorry if this is going on and on, I have been researching this for months, there is so  much involved in moving back home to Canada, I know it will all be for the best, we are so excited and happy to be moving back, it will be a sad day leaving our home here in USA, but its a new adventure !!!!
If anyone has questions I will try my best to answer, with regards to moving companys, exporting your car from usa ,then importing to canada, info on driving license exchange...the list is endless !!! I am willing to share any information I have found, thank you, have  a great day.

salt cured

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #15 on: April 07, 2019, 08:28:28 AM »
Thanks for the update! I was looking at opening a brokerage account with RBC USA, but it looks like they only offer active asset management? If so, too bad. I think I will try to speak to a cross border tax advisor when I'm in Ontario for a wedding this summer.

coco1106

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #16 on: April 08, 2019, 01:00:21 PM »


    @ salt cured
 Hi...... I have a appt with RBC usa this summer about maintaining our retirement accts when we move to Ontario, also I called Charles Schwab, who told me that they could also maintain our IRA, roths when we move,
We will meet up with both firms then decide who to transfer our funds with.

salt cured

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #17 on: April 08, 2019, 08:53:38 PM »
Good luck and please keep us updated! Nice to know that Schwab (and TD, from the discussion above) seems like a good option.

coco1106

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #18 on: April 09, 2019, 06:11:48 AM »

   Thank you Salt Cure,

I also have a appt with a cross boarder tax specialist in July.............$350 for a hr consult !!! But we think its money well spent, the office in question specializes in USA/CDN tax prep.
We just want to ensure everything is done correctly .

We are thinking maybe the first 2 yrs we will use them , after that we have access to a accountant who can help us out...we are moving to a boarder town , so there are accountants who can do USA tax  preps they can take care of things once we have settled down.

Goldielocks

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #19 on: April 09, 2019, 09:28:03 PM »
I found that  I could mimic what the tax accountant did the second year.... the year you are not crossing the border, but FT in one area is much simpler.   You should not need the accounting help for more than one year.

Cdn taxes are quite a bit simpler than US ones, (except for a year that you roll over an IRA into an RRSP, that was a headache for me, there are alternate tax calcs similar to  AMT to ensure minimum tax / adjusted tax credits).

coco1106

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #20 on: April 10, 2019, 02:12:09 PM »


  Goldielocks....yes I agree after the first yr we will go with a cheaper tax accountant, they do have a accountants who can take care of usa preps, I think after the first yr when things are a bit more simple we will switch to BDO.

I think my husband and I could handle things after 2 -3 yrs.

thank you for your input.

cloudsail

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #21 on: April 15, 2019, 04:27:19 PM »
I don't understand, don't a lot of FIRE people who travel the world keep their investments in Vanguard? They just use a mailbox service for their mailing address. How is this any different? I mean, as long as you don't relinquish your American citizenship, who's to say that you're in Canada permanently? Maybe you decide to move back after a couple years.

Goldielocks

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #22 on: April 16, 2019, 09:23:47 PM »
I don't understand, don't a lot of FIRE people who travel the world keep their investments in Vanguard? They just use a mailbox service for their mailing address. How is this any different? I mean, as long as you don't relinquish your American citizenship, who's to say that you're in Canada permanently? Maybe you decide to move back after a couple years.
Well, Canada wants you to pay taxes properly if you are living here for more than 6 months of the year.  That's one.
Two, you can get health care if you are resident in the province (not on a visitor visa) for more than 3 months.
Three, your kids can go to school.
Four, you could be deported if you are here illegally (stay longer than  6 months without an approved visa / residency).

The investment thing is tied to residency.  It can take 6 months to a year (at most)  for the bank to catch up if you don't make a point of telling them... but they do catch up because legally, they need to be on top of this to remain in compliance with their investment licenses.

cloudsail

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #23 on: April 16, 2019, 09:39:32 PM »
I recall there was another thread about this topic and someone said they called Vanguard to ask them, and Vanguard specifically said as long as you have a U.S. mailing address they don't care.

Fidelity may operate differently of course.

I'm having trouble finding the thread now.

cloudsail

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #24 on: April 16, 2019, 09:55:50 PM »
I found the thread: https://forum.mrmoneymustache.com/canada-tax-discussion/financial-plan-moving-to-us-to-canada-soon/

Does it matter if it is Canada vs any other country? I know Jeremy and Winnie at Go Curry Cracker are for all intents and purposes residents of Taiwan right now.

Goldielocks

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Re: us/cdn citizen moving to Ontario.HELP with 401k,IRA Roth
« Reply #25 on: April 16, 2019, 09:58:19 PM »
I recall there was another thread about this topic and someone said they called Vanguard to ask them, and Vanguard specifically said as long as you have a U.S. mailing address they don't care.

Fidelity may operate differently of course.

I'm having trouble finding the thread now.
Your credit report does tend to catch up to the fact that you have moved.   Some people travelling extensively can arrange for a mailing address, but that requires some planning work, and I am not sure how the tie between Equifax Canada (where you obviously are trying to build a credit score) and Equifax USA works.   I do know that our bank found out that the US mailing address we gave was not our resident address withing 6-12 months.