Are You Retiring to Canada from the USA?
Written by Tiffany Woodfield, CRPC®, CIM®
Reading Time: 8 minutes 30 seconds.
Many of our clients call us when they're planning their retirement or work-optional lifestyle in Canada. Like them, you might be considering what you want your next adventure to be. If you're planning on retiring to Canada from the USA, then this article will help.
As a cross-border financial advisor, I'm primarily focused on helping dual-citizens and green card holders manage their financial transition with ease. This article will cover the financial and other essential aspects anyone retiring to Canada from the United States should consider.
The Financial Implications of Immigrating to Canada Permanently
While you are likely excited about retiring in Canada from the US, you are also probably nervous about getting everything done—and doing it correctly. There are numerous financial considerations and other logistics. While we can't cover all of them in this article, here are just a few of the top items anyone moving to Canada should think about:
THE COST OF LIVING IN CANADA
The most expensive cost will likely be your housing. Still, you also need to consider that food, gas, and clothing are usually more expensive in Canada.
THE TAX IMPACT OF MOVING YOUR ASSETS
When moving your assets from the US to Canada, you may have to pay additional taxes. If you decide to collapse a registered plan such as an IRA or 401(k), it's more than likely you'll have to pay tax on those funds. All the pretax money will become taxable in the year you take it out.
Also, when you sell your home in the US, you may owe tax on the capital gains if the gain is above the allowed thresholds.
RENOUNCING CITIZENSHIP OR GIVING UP YOUR GREEN CARD
If you decide to renounce your citizenship, you will need to understand if you are a covered or non-covered expatriate. Your citizenship choices may have tax implications, so speak with a cross-border accountant to find out more.
CAN YOU CLAIM YOUR PENSION AND SOCIAL SECURITY IN CANADA?
Social security may be reduced by CPP because of the WEP or Windfall Elimination Provision. The result is still better if you apply for both, but be aware that your social security may be reduced slightly.
UPDATING YOUR WILL
You will need to ensure you have updated your will, particularly if you have beneficiaries and assets on both sides of the border.
SPEAK TO A CROSS-BORDER LAWYER
Do you have revocable living trusts in the US? These are treated differently in Canada. It would help if you spoke to a cross-border lawyer about some of the trusts that may work for your particular situation. Whether you've already done your estate planning or not, it's critical to take care of this if you're planning a move from the US to Canada.
Top Investing Pitfalls to Consider When Retiring to Canada
There are common investment pitfalls that you can fall into when you consider retiring to Canada. Here are just a few of the pitfalls you should watch out for:
- You can benefit from dealing with one advisor if they are dual-licensed, which means they are licensed and regulated in Canada and the US. You should confirm that your current US advisor is licensed to help you once you move to Canada.
- Waiting until you have already moved before considering the impact on your investments can have a costly downside. It's easier to take care of this in advance.
- If you have multiple 401(k)s from your career in the US, consider how these will be managed when you move to Canada.
- Your company plan could force you to collapse your investment account due to non-residency or account size. Also, these accounts often "become" "frozen." They aren't actively managed because you are a non-resident.
- You may be in a higher tax bracket when you are in Canada, and you may want to consider planning strategies before you move.
Benefits of Working with a Cross-Border Accountant to Avoid Tax Issues
When you work with a cross-border accountant specializing in helping people moving to Canada, you learn tax planning opportunities and avoid tax issues. They can offer strategies to allow you to utilize foreign tax credits fully. A cross-border accountant understands the Canada-US Income Tax Treaty. They can provide a pre-move consultation that looks at ways to make a move easier. They can work to prevent you having to pay easily avoidable taxes.
If you are considered a US person once living in Canada, you will need to file a tax return with the IRS. A cross-border accountant understands the forms that need to be filled out and can offer advice to keep you onside with the IRS.
Consider How Your Estate Planning Needs Will Change
Although Canada and the US are so close in proximity, the rules and regulations are different when planning your estate. The strategies you used to protect your wealth in the US will be different when you move to Canada.
Working with a cross-border lawyer can help you to determine if you need one will or two, and guide you on the implications if you still have a business in the US. You will need to consider gifts, succession and generation-skipping implications in the country in which you will live.
There are estate planning and investment tools that may not work the way you expected when you move across the border. When you have a non-US beneficiary, there are planning options you will want to discuss with your lawyer regarding gifts or inheritances.
Why Leaving Your Car in the USA Might Be Best
We often do road trips across the border to visit family and friends or enjoy a vacation. We don't think twice about our vehicle.
The difference is that when you cross the border to move to Canada, you are then importing your vehicle to Canada. You will have to determine if your car is admissible to Canada as there are several conditions.* You will need to go to the Registrar of Imported Vehicles and Transport Canada to see if it is allowed to be imported.**
It is important to have the vehicle's title because this shows you are the legal owner of the vehicle. You will need an ITN International Transit Number, and you will need to call ahead at least 72 hours before you leave to export it from the US.***
Once you arrive at the Canadian customs gate, you will be directed to where you go to pay taxes on your imported car. As you can appreciate, it is a lot more complicated than a road trip.
***US Customs-For Exporting Vehicles
The Financial Benefits of Healthcare in Canada
When retiring to Canada, you have probably already considered the amount of money you will be saving because of Canada's publicly funded healthcare system. In the US, you take into consideration your medical expenses in retirement. But, in Canada, healthcare is universal and based on your needs rather than your ability to pay for services.
The limitation you may find in Canada's system is that the service level may not be what you are used to. In big cities, you may struggle to find a doctor who is taking on new patients. Of course, you can still always go to a walk-in clinic.
Do You Need to Relinquish Your US Citizenship to Move to Canada?
Although you have to continue to file your taxes as a US person even if you are no longer a resident, this isn’t necessarily a reason to give up your citizenship. If you can find a team to work with you and guide you through the common cross-border issues, you can keep your US citizenship and live in Canada comfortably. Both Canada and the US allow dual-citizenship. If that's your choice, then you will have the benefits and rights of citizens in both countries. You also could decide to keep your US citizenship and just become a permanent resident of Canada.
It is a very personal choice, so be sure you make a choice that feels right for you. Whichever choice you make, there are ways to ensure you can manage your finances in a stress-free way.
Summary of Key Points:
- Consider the investment pitfalls before you move.
- Remember that your estate planning needs will likely change when you move from the US to Canada.
- You may want to leave your car in the US.
- You don't need to give up your US citizenship to move to Canada.
- Healthcare in Canada is publicly funded. However, in big cities finding a family doctor can prove challenging.
Next Steps
If you’re planning your retirement and need help with wealth management, estate planning, and portfolio management, please get in touch. At SWAN Wealth, we specialize in cross-border financial planning and wealth management.
More Cross-Border Financial Planning Articles & Guides
If you’re planning a cross-border move, these articles and guides will help you simplify your move and make sure you’ve got everything covered.
Roth IRA Canada: How to Manage Your Investments Across the Border
The Ultimate Financial Planning Resource for Dual Citizens or Green Card Holders Living in Canada
Retiring to Canada - A Financial Planning Guide
Financial and Tax Planning for US Citizens Living in Canada
Canadian RRSP Facts for Dual Citizens, Expats and Canadians
Information in this article is from sources believed to be reliable, however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. The views are those of the author, SWAN Wealth Management, and not necessarily those of Raymond James Ltd. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision. Raymond James Ltd. is a Member - Canadian Investor Protection Fund. Raymond James (USA) Ltd., member FINRA/SIPC. Raymond James (USA) Ltd. (RJLU) advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered.
About the Author
Tiffany Woodfield is a dual-licensed financial advisor and the co-founder of SWAN Wealth Management, along with her husband, John Woodfield. Tiffany specializes in advising clients who live both in Canada and the United States and need to simplify their cross-border financial plan, move their assets across the border, and optimize their investments so they can minimize their tax burden. Together Tiffany and John Woodfield help their clients simplify their cross-border finances and create long-term revenue streams that will keep their assets safe whether they live in Canada or the US.
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