Let’s say you’re nearing retirement age and considering a move to Canada for the lower healthcare costs and proximity to your family north of the border.
became permanent Canadian residents.
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Moving to another country — including Canada — is complex. Canada doesn’t offer a retirement visa like some other countries. And Americans don’t have any special status with Canada that will get them ahead of the line in the immigration queue.
(IRA) would work across borders.
Here’s what you should know.
Key steps to retiring in Canada
If you’re moving to Canada for work, you’d need to have a job offer or qualify under an immigration program. You’d also need to prove you can support yourself, such as having proof of funds.
One option for retirees is to stay in Canada temporarily. As an American, you can stay in Canada as a visitor for up to six months at a time and don’t need to apply for a visa. You can even own real estate north of the border, so long as you exit Canada every six months.
This limitation could actually make it easier to handle your retirement accounts, since they could remain in the U.S. (and you could open a U.S. dollar bank account in Canada).
(PNP), which require you to meet educational, language proficiency and skilled work experience criteria.
You may want to consider moving to Canada before you retire to take advantage of work-related visas. Or, since you have family in Canada, a family member may be able to sponsor you.
after living in Canada for at least three out of five years, but keep in mind it can be a lengthy, complex process.
5 of the easiest ways you can catch up (and fast)
Understanding the cost of living in Canada
The cost of living in the U.S. is generally higher than in Canada, though it depends on where you’re moving from and where you’re moving to.
at the time of writing. However, local purchasing power is 35% higher in the U.S. than in Canada.
Taxes are generally higher in Canada, but citizens receive more services for those tax dollars. That includes publicly funded healthcare, which means you receive “free” care (paid for with taxes) at a doctor’s office, clinic or hospital.
While Americans can receive medical care in Canada, it’s not free unless you’re a permanent resident — in which case you may be eligible for provincial or territorial coverage. If you’re moving to Canada and not yet a permanent resident or citizen, you’ll want to have health insurance.
In fact, many Canadians have supplemental health insurance for care that isn’t covered, such as prescription drugs, vision care and dental care.
. Canadian cities like Toronto and Vancouver also have higher housing costs than many smaller U.S. cities.
Managing your US retirement accounts across the border
If you decide to become a permanent resident or apply for citizenship in Canada, you’ll need to understand the implications for taxes, retirement accounts and Social Security. For example, Americans living abroad — including Canada — must continue filing taxes in the United States. That’s the case, even if they become a resident of another country.
However, under the United States–Canada Income Tax Treaty, both the U.S. and Canada provide a foreign income tax credit for any income tax paid in the other country, which helps citizens avoid double taxation.
While Canada taxes U.S. retirement income, U.S. Social Security is only taxed in the country of residence.
(IRS).
Your Social Security benefit can be deposited directly into a Canadian bank account, either in Canadian dollars or in U.S. dollars (if you have a U.S. dollar account).
.
. Once a distribution is taken, you’ll need to claim that as income when filing your Canadian tax return.
. But you can’t transfer a Roth IRA in the same way.
. “When distributions are eventually made, they too may be exempt from Canadian tax by the Treaty (under certain conditions).”
If you decide to proceed with permanent residency, you’ll want to find a cross-border tax advisor who can advise you of the best options for managing your money and reducing the possibility of double taxation.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
