Canadian Guide to US Retirement Accounts
This is a general overview of how retirement accounts work in the US in the perspective of a Canadian citizen who is working in the US and doesn’t know which country they want to retire in. As a quick disclaimer, I am not an accountant, financial advisor, nor a lawyer. You should consult cross-border financial experts (aka not me) when making financial decisions.
This is a followup to the New Grad Techie’s Guide to US Retirement Accounts.
For the situation, I’m assuming that
- You’re a Canadian citizen that’s initially a tax resident of Canada
- You move to the US for a job, and you become a tax resident of the US (this is partly a choice) 
- If you move back, you become a tax resident of Canada again
Last updated: January 1, 2020
Quick overview of Canadian accounts 🇨🇦
The Tax Free Savings Account (TFSA) allows you to invest $6,000 CAD of cash (post-tax money) a year into the account, and you have freedom to decide how you invest your contribution within the account.
- You can withdraw your contribution and interest tax-free at any time.
- Your contribution room is cumulative, so as long as you’ve been a Canadian resident, the amount you can contribute has been growing each year.
- If you withdraw after contributing, you cannot contribute that amount back the same year, but you get the contribution room back the year after.
The Registered Retirement Savings Plan (RRSP) allows you to defer income. Essentially, you’re postponing you receiving that income to a later date, so you don’t pay income tax on the income now, but you will pay income tax on your contributions and any growth when you withdraw.
- The contribution room you receive is calculated from your previous year’s income
- When you withdraw, you permanently lose the contribution room from your original contribution.
Comparisons to US accounts 🇺🇸
The TFSA is most similar to the Roth IRA, but
- The TFSA contribution room is cumulative, but the Roth IRA room is not. Once the tax year has passed, you have lost the room for the Roth IRA.
- You can withdraw everything from the TFSA at any time with no tax penalties. The Roth IRA is more complicated, with the 5-year rule for withdrawals, taxes on growth before retirement age, and different ways to have qualified distributions.
The RRSP is most similar to the Traditional 401(k), but
- The RRSP room is also cumulative, and the 401(k) one is not.
- The RRSP room increases with your income (18% of your income) up to $27,230 CAD. You can contribute up to 100% of your paycheque toward your 401(k) up to $19,500 USD.
- You can withdraw from your RRSP at any time without penalties besides income tax. The 401(k) has an early withdrawal fee for withdrawing before retirement age.
- You can contribute to your RRSP from your post-tax money and deduct your income when reporting taxes. With the 401(k), you can only contribute by taking a portion of your paycheques.
Canadian accounts when moving to the US 🇨🇦✈️🇺🇸
In general, most people recommend getting rid of your TFSA when moving to the US. The process of reporting the TFSA to the US for taxes is unclear, and you don’t get any tax benefits while you’re in the US.
You probably want to keep your RRSP in Canada. In this case, you’ll probably have to file the FBAR every year as you’ll likely have more then $10,000 USD in assets outside of the US. However, since 2014, you aren’t taxed on growth in your RRSP, and you no longer have to report the growth to the US every year, as long as you aren’t withdrawing from your RRSP. However, you may be unable to rebalance your portfolio while you’re a US tax resident.
US accounts when moving back to Canada 🇺🇸✈️🇨🇦
Canada and the US have tax treaties to make sure you’re not completely screwed over when you move between countries. There’s many, many analyses of what happens to your US accounts when you move to Canada.
- Sun Life Financial - Strategies for Canadians with U.S. retirement plans
- Advisor - How to bring 401(k)s and IRAs to Canada
- Expat Tax Professionals - Roth IRA Taxation For Expats In Canada
- Raymond James - Moving A 401(K) or IRA to Canada: How To
- BMO - Moving your U.S. retirement plan to Canada
- Moneysense - Should I transfer a 401K into Canada?
This is my potential plan for retiring in Canada, after reading the above articles:
- Roth 401(k): Roll over to the Roth IRA before moving to Canada.
- Traditional 401(k): Roll over to Traditional IRA before moving to Canada.
- Roth IRA: When you move back to Canada, never contribute to it again . Make a one-time election  to defer taxes on the Roth IRA to the CRA the year you move back. You’re able to withdraw your contributions and earnings tax-free when you make qualified withdrawals. You’d want to make sure the IRA provider allows you to keep the IRA while being a non-US resident.
- Traditional IRA
- If the numbers work out, you could rollover the balance to the RRSP. In this case, the IRA provider will withhold 15-30% (depending on how the IRA provider interprets the law), and you’ll receive the rest in cash. You’ll receive contribution room equal to the balance of the IRA in the RRSP that expires unless contributed that same year, and the balance will be considered income. The withholding can be claimed under foreign tax credit. This could make sense if you have enough cash to make up the remaining contribution room in the RRSP (i.e. the withholding), and you have enough income in Canada to utilize the tax credits.
- It could make sense to leave the IRA in the US if the IRA provider allows it.
This plan may not make sense for you, and there are many options on what to do with your money that are specific to your situation (again, you should consult a financial advisor).
Canadian accounts after moving to Canada 🇨🇦
When you become a Canadian tax resident again, you’re able to contribute to the TFSA. You should have the contribution room from before you left, but you will not have earned any contribution room for when you were a US tax resident.
For the RRSP, you will also have the same amount of contribution room as before, but you will not have gained additional contribution room while you were in the US as you have not been paying Canadian taxes.
-  Tax residency is different from residency. You can be a tax resident of the US while being a resident of Canada.
-  If you contribute to the Roth IRA while you’re not a resident of the US, things become complicated. Your Roth IRA is effectively split, where your new contributions act like a savings account, and gains on it are taxed in Canada.
-  There is no form for this. You can find examples on how to write this in the linked articles.