Invest in 401K OR NOT?

Thomson Reuters / Eng
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Thomson Reuters Eng

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Jun 1 9 Comments

Canadian moving to US for job soon, wondering if I should contribute to 401k or not, as I might move back to Canada after a few year.

Any advice?

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TOP 9 Comments
  • Broadcom Ltd. / Eng
    headbanger

    Broadcom Ltd. Eng

    PRE
    Intel, Broadcom Ltd.
    headbangermore
    Put just enough money in 401k to get the employer’s match. And if provided, make your portion of contribution 401k Roth so the taxes are paid upfront. The company portion is always traditional 401k.
    Then right before going back to Canada, roll over all your 401k into IRA Roth. You want to the rollover in a year with the lowest US income so the tax penalties on the traditional 401k are minimum.
    Canada does not recognize 401k as a retirement plan. But it does recognize IRA as one. Hence the rollover before you go back.
    Jun 4 3
    • Qualcomm / Eng embengg
      Don't you have to typically rollover from 401k to either IRA or ROTH IRA once you leave your current employer? And within Canada if you want to defer taxes on whichever IRA you have, you need to do by writing to CRA and electing for that.
      Jun 4
    • Broadcom Ltd. / Eng
      headbanger

      Broadcom Ltd. Eng

      PRE
      Intel, Broadcom Ltd.
      headbangermore
      Rollover is optional, not mandatory. The key thing is everything should be in Roth IRA before moving back to Canada. Converting traditional 401k to Roth IRA isn’t straightforward and there’s taxes to be paid. But you’re better off doing that while still in the US.
      Serbinski’s tax forum is a good place to find out more info about the paperwork needed for CRA.
      Jun 5
    • Qualcomm / Eng embengg
      I found this https://forums.serbinski.com/viewtopic.php?t=12770. And from one of the responses, "
      2. First off, let's be clear that the reason IRA's and 401(K) are not reported on T1135 has nothing to treaty. It is by the CRA definition of what is or is not a specified foreign asset. IRAs and 401(s) are foreign pensions, thus not subject to T1135 reporting." So looks like you could still keep traditional IRA or 401k? If you convert to Roth you pay taxes now plus 10% penalty to each IRS and CRA?
      Jun 5
  • SAP Crazy7
    Close your eyes and invest. There is nothing you have to lose, everything to gain. Even if you are moving back to Canada, you can still withdraw the money from your 401k.
    Jun 1 1
    • New / Eng cousin
      But wont uncle sam take like half of it if you do that before you’re a really old man?
      Jun 2
  • Amgen Fin4eng
    Invest at least up to the match. Whether to max it depends on specific tax treatment of the 401k with Canada
    Jun 1 0
  • New
    DesusNice

    New

    BIO
    Tc = broke. Education: the Derek Zoolander school for kids who can’t read and want to do other stuff good too
    DesusNicemore
    For sure invest . Uncle Sam will just tax it if you don’t
    Jun 2 0
  • New pbYo77
    I am making the same move soon. Would be interested to know as well. What do we do with our RRSPs then?
    Jun 1 0