Location: mississauga, ontario
Posted on: 20-05-08 14:08:05
Hello,
I am Canadian citizen who is now working US with a US company on a TN Visa.
Im planning to save for retirement and am confused between using either RRSP or 401k with my US company
This is the first time i will be opening such an a/c and i never had an RRSP in Canada before. My Residence is still Canada, but im just working in US and im 25 yrs old, so i will probably be working in both US and Canada over a long time. Maybe i might come back to canada next year to work or continue in US too, nothing decided.
Im confused between deciding, whether to start the 401k here in US or to open up a RRSP a/c with a bank like Royal or TD in Canada (am i allowed to do that if im not working in Canada ?).
What would be a better place to start such an a/c, 401k or RRSP. How easy is it to move money from 401k to RRSP if i work in Canada in future.
Thanks,
Milind.
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Milind
Location: Western Hemisphere
Posted on: 20-05-08 14:47:46
RRSP is based on your Canadian residency and your earned income from the previous year. So, as long you maintain residence in Canada for tax purposes, your US wages is considered earned income. Therefore, based on your previous year's income, you can contribute to your RSP. Hence, you can open an account at a Cdn institution.
401k is offered by your employer. Employers allow you to contribute certain percentage to the limit allowed by IRS and in a lot of cases will match upto a certain percentage. Most employers and 401k institutions don't care where you live, they only care that you work to be eligible for the 401k.
You cannot move money betwwen RSP and 401k.
Caution. Your 401k is mostly pre-tax. Hence your US taxable wages are x dollars minus the 401 contribution. However, for Canada, you will be taxed on the x dollars (the entire amount). So, you may end up paying to Canada. However, you can offset that by taking RSP deduction. Thus you can take advantage of saving in both 401 and RSP. The impact of taxes tends to be higher when the exchange rates are vastly different instead of the current one to one.
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Dimple2001
