Bringing the 401K Home to Canada

- A Story of Financial Success

Mary is a Canadian citizen who’d spent 6 years of her professional life in the USA. Mary was looking for a way to bring the money in her 401K to Canada. (A 401K is the US-equivalent to the Canadian RRSP.) She wanted to transfer the contributions in her 401K to Canada and her Canadian investment account with the least amount of tax pain or penalty.

Mary first tried to solve the problem on her own by searching for answers online. While there was no shortage of resources available, navigating the complex tax regulations and 401K/RRSP rules on her own was overwhelming.

 

Professional Help Helps

That’s when Mary met us at The Lifestyle Protector. We met and assessed Mary’s situation and determined that she could transfer her 401K to Canada and deposit it into her RRSP, given certain conditions, on a tax-deferred basis. Yay!

We plotted a path forward that included a lot of up-front research and the creation of  a necessarily robust paper trail. We worked together with Mary through each step of the process, helping her source each piece of paperwork, meet the right people and plan her next move.

The first thing Mary did was get the proper withdrawal paperwork from the US management company holding her 401K. Next, we introduced Mary to a US tax accountant in Canada who advised on the amount of withholding the investment company should apply. When Mary submitted the appropriate treaty tax benefit form, we ensured the amount of withholding tax was reduced by half, from 30% to 15%!

Within a few weeks Mary indeed brought her 401K to Canada. She received a cheque for the full amount minus the 15% withholding that was submitted to the IRS.

 

No RRSP Implications

The final question was whether rolling the 401K into an RRSP would consume her unused RRSP room. No problem: we showed Mary how she could transfer funds from a foreign tax-deferred account into an RRSP without issue by investing 100% of the account’s value. There was also no loss of available RRSP contribution room. Just the result Mary was looking for!

International transfers can be convoluted and challenging. We like to think, solutions are easier to find, navigate and implement with The Lifestyle Protector by your side.

I, for one, am very thankful to Tara for connecting us and for you – both for the incredibly helpful financial support you have provided  “from the heart” and the great energy you send out into the world. It is truly special – as are you.

Mary

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