Canadian working in the US - should I pay into RRSP or 401K?
I need some advice on retirement savings. I am a Canadian citizen, living in a border city. I recently started a job in the US. Before this, I was at a job in Canada, which I was putting money into my RRSP at. (Canadas version of a 401k). I really only put a…
I need some advice on retirement savings. I am a Canadian citizen, living in a border city. I recently started a job in the US. Before this, I was at a job in Canada, which I was putting money into my RRSP at. (Canadas version of a 401k). I really only put a couple hundred dollars in there. Well now that I’m working in the US, I have the opportunity to sign up for a 401k, which my company will match at *I believe* 6%. I’m not sure how this would work for me and if I should be paying into the 401k, or just going and my own to put money into an RRSP or different type of savings account in Canada. I have no plans to move to the US, so I imagine when I one day take out the 401k, I’d be transferring the money to Canada. I’m not sure what the taxes would look like on both sides for doing this. (If I’d get taxed by Canada for getting this lump sum). I’m also concerned about owing Canadian taxes next year, and thought paying into the RRSP might help me a bit with that. I know nothing about this stuff so any advice or explanations are greatly appreciated.
Collected discussion
Given that you work in the US and are paying taxes to the IRS, you're very likely able to contribute to a 401k, so I'd do that, especially if your company offers a match. It's unclear whether you would pass the residency requirements to be considered a Canadian resident and you can only contribute to an RRSP if you're a tax resident of Canada. Do you live in Canada but cross the border every workday? If somehow you do qualify and have extra money then I'd contribute to an RRSP too, but don't blindly contribute without confirming you're eligible through tax residency.
I live in Canada, born in Canada, cross a couple times a week for work. I’ll definitely get in touch with someone and see if I qualify, that hadn’t occurred to me before.
This is amazing advice thank you, I’ll look into this
I’m a Canadian resident/citizen. Would this still be the way to go
If you're still filing taxes in Canada, then ignore that advice. If you're getting 401k matching, contribute as much as you can get matched (free money is free money). Then contribute to rrsp. The only downside to the 401k is not being able to borrow against it for a first-time mortgage in Canada, unless you go through a bunch of hoops (and cost) to get it moved to an rrsp. But you'll be able to draw from it in retirement like a normal retirement account. Also: r/PersonalFinanceCanada
One thing you (or preferably an accountant or tax attorney) should look into are the protections that may be afforded to you under the U.S. - Canada tax treaties. You may be able to leave your 401(k) and match even if you do eventually stop working in the US and return to working in Canada rather than cashing it out. If you wait eventually withdraw it after reaching the age of 59.5, Canada may respect the preferential tax treatment of those assets as they grow over that time period. However, the exact nature of the treaty and how you might be affected are questions for a qualified professional and not for Reddit.
They need to spend 51% of their time in the state's. I work in the USA as well and need to track my days so I don't go over.
Don’t touch your rrsp while you’re a us resident. 401k all the way.
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