Should a Canadian citizen who lives and works in the U.S. continue to contribute to a RRSP account?

By Joseph Nguyen AAA
A:

No, a U.S. resident should not contribute to a RRSP account. RRSP contribution rules allow you to contribute a certain percentage of your earned income, but since your income is not from a Canadian source, you would not be eligible for any tax deductions in Canada.

However, even though you are not eligible to contribute to your RRSP, you are still allowed to keep your RRSP to let your investments grow without being subject to tax in Canada. As a U.S. resident, you can elect to defer income generated from your investments in your RRSP until it is withdrawn by filling out Form 8891 each year with your tax return.

In addition, if you are emigrating from Canada, you should maximize your contribution in the year that you leave Canada. The government gives you 60 days after year-end to make this contribution. Also, it is important to note that if you have taken any money out of your RRSP under the Home Buyer's Plan (HBP) or other plans, you should arrange to repay the amount before becoming a non-resident. Otherwise, that outstanding amount may be subject to income tax for the year of emigration. (To learn more about the retirement planning process, read Retirement Planning.)

If you do plan on staying in the U.S. for an extended period, you may want to look into opening an individual retirement account (IRA). You will be allowed to open an IRA in the U.S., as long as you are a legal U.S. resident with a valid social security number. This will allow you to defer taxes on contributions you make from income earned in the U.S. (For more information on choosing the right IRA, take a look at our article, Which Retirement Plan Is Best?)

RELATED FAQS

  1. What is the difference between a Traditional and a Roth IRA?

    The main difference between a Traditional and a Roth IRA is the way contributions are deducted for tax breaks. Whereas contributions ...
  2. Should I collect early Social Security?

    The earliest age that you can start receiving social security benefits is age 62. Full retirement was age 65 for many years; ...
  3. I am in my mid thirties and have nothing invested for retirement. Is it too late ...

    It is never too late to start saving for retirement. Even starting at age 35 means you will have more than 30 years to save.The ...
  4. I work for two companies. How much can I contribute to each company's SIMPLE IRA?

    It depends.If you work for two companies that are unrelated and unaffiliated, you can make salary deferral contributions ...
RELATED TERMS
  1. Gold IRA

    Definition of Gold IRA
  2. Keystone XL Pipeline

    A proposed extension of the Keystone pipeline system that is ...
  3. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all ...
  4. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose ...
  5. To Fund

    A type of target-date retirement fund whose asset allocation ...
  6. Through Fund

    A type of target-date retirement fund whose asset allocation ...
comments powered by Disqus
Related Articles
  1. An Overview Of The Pension Benefit Guaranty ...
    Retirement

    An Overview Of The Pension Benefit Guaranty ...

  2. Medicare 101: Do You Need All 4 Parts?
    Retirement

    Medicare 101: Do You Need All 4 Parts?

  3. Business Owners: Rules For Qualified ...
    Entrepreneurship

    Business Owners: Rules For Qualified ...

  4. Keeping Track Of Retirement Plan Assets
    Retirement

    Keeping Track Of Retirement Plan Assets

  5. Tips On How To Use IRAs To Boost Retirement ...
    Retirement

    Tips On How To Use IRAs To Boost Retirement ...

Trading Center