Getting the Most Out of Your RRSP While Living in the United States

12 / Oct AUTHOR NAME: Stuart Campbell 0 COMMENTS

Most Canadian residents participate in something known as the Registered Retirement Savings Plan, essentially a legal trust that can contain anything from stocks and bonds to mutual funds and guaranteed investment certificates. 

The real benefit with an RRSP is that any contributions made in a given year are tax deductible — up to point, of course. What’s more, any growth within the account isn’t considered part of your “earned” income. It’s only taxed upon withdrawal, theoretically at time of retirement when you pay less in taxes.  

If you plan on living out your retirement in Canada, rarely will you run into issues with this type of account. But the same can’t be said for anyone who has moved to the U.S. from Canada and left his or her RRSP across the border. 

For non-residents of Canada, you may have a tax liability to not only the IRS but the Canada Revenue Agency. In fact, tax withholding is 25 percent on lump sum withdrawals and 15 percent on periodic pension payments.  

So, you should be asking yourself why you’ve left your RRSP, as well as your RIF or LIRA, in Canada. 

Potential Compliance Problems

Though RRSPs can remain in Canada and grow tax-deferred until withdrawal, you can still run into some problems when holding a Canadian retirement account as a U.S. resident. Besides not being able to make any additional contributions to your plan, the following are some of the main issues: 

1. Withdrawal withholdings. Canada didn’t always withhold 25 percent on lump sum payments. It was once 15 percent. Who’s to say this won’t change again in the future? You’ll be subject to any changes to the tax rules in not one but two countries.

2. Foreign tax credits. The Canada-U.S. tax treaty allows a foreign tax credit for taxes withheld by the CRA when the RRSP plan holder is alive. After your passing, the credit no longer applies.

3. Capital gains taxation. Appreciating assets like stocks or growth mutual funds almost always face double taxation on capital gains. This is a result of the IRS taxing the gains on the RRSP account and the CRA withholding taxes.

4. Estate plan structures. U.S. estate plans cannot be designed to adequately deal with Canadian RRSP accounts.

5. Currency speculation. If you’re going to retire in the U.S., you’ll likely need and want to spend U.S. dollars. At the time of your retirement, where will the Canadian dollar be compared to the U.S. dollar?

6. Investment options and fees. The U.S. is the largest capital market in the world. As an investor, you have more choices with lower fees and lower transaction costs on your investment accounts compared to Canada.

7. Canadian broker licensures. As a U.S. resident, you’re subject to Security Exchange Commission (SEC) rules. Your Canadian broker or investment firm must be licensed in your state to legally transact security trades for you.

This means you may be stuck with your current stocks and mutual funds, unable to change investments or react to changing market conditions — not an ideal situation for any investor.

8. Filing requirements. You’re also subject to both Foreign Bank Account Report and Internal Revenue Service filing requirements every year you hold foreign investment accounts.

 Markets rise and fall, as do levels of income and expenses, so it’s critical to revisit a retirement plan every few years — at least that’s our experience at Campbell Wealth Advisors. If your last retirement plan was done more than five years ago, prior to your move to the States, chances are good that some changes are in order. 

 To learn more about RRSP and other wealth management strategies for Canadian-residents U.S. citizens, download our white paper: 7 Keys to Wealth Management for Canadians Living in the U.S.

 At or contact us by email at: Or by phone at: (952) 474-1270


Investment Advisory Services offered through Retirement Wealth Advisors, (RWA) a Registered Investment Advisor.  Campbell Wealth Advisors LLC and RWA are not affiliated. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.

This information is designed to provide general information on the subjects covered, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Campbell Wealth Advisors LLC and its affiliates do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.

Leave a Reply

Your email address will not be published. Required fields are marked *