Cross-border FAQs: 401(k)s, RRSPs, orphaned accounts and inheritances
The questions Americans in Canada and Canadians in the U.S. ask most often, answered briefly.
This article was published on November 5, 2024, more than a year ago and is not continuously updated. Tax and securities rules may have changed since. Check the sources at the end of the article, and the date, before acting.
Is there such a thing as a Canadian 401(k)?
No. The Canadian equivalent of a 401(k) plan is a Registered Retirement Savings Plan (RRSP). You cannot “roll over” 401(k) and IRA accounts into an RRSP without first collapsing the account and taking potentially high taxes and penalties.
Is there such a thing as a U.S. RRSP?
No. In the U.S., a 401(k) plan and an individual retirement account (IRA) are similar to an RRSP. However, you cannot roll over an RRSP into a 401(k) or IRA without first liquidating the RRSP, which could trigger significant penalties and taxes.
My financial advisor said they can no longer manage my accounts. What do I need to do?
Most U.S. brokerage firms cannot hold 401(k)s or IRAs for people residing in Canada. A dual-licensed cross-border advisor can. With one, you keep these accounts and won’t have to collapse or liquidate them, actions that risk significant penalties or tax consequences.
If you are a Canadian who moved to the U.S., you may be able to leave your RRSP with your Canadian brokerage, though the account may need to be self-directed, meaning you make all the investment decisions without guidance. A dual-licensed cross-border advisor can hold the account and still provide ongoing investment guidance.
What happens if I don’t transfer my retirement account?
Most U.S. brokerages give 30, 60 or 90 days for clients to move their assets to an eligible firm. Others may sell off invested assets at the current market value and simply send a cheque for the balance, potentially leading to significant penalties or tax consequences.
Are there special concerns about my Canadian retirement savings once I live in the U.S.?
RRSPs and TFSAs can create complex situations for tax-paying residents of the U.S. Advisors licensed in both jurisdictions can provide guidance on how to manage those issues. Canadian cash accounts can, in many cases, simply be moved to a U.S.-licensed firm, though different actions may be required based on the types of assets.
Can one advisor manage both my Canadian and U.S. investments?
Yes, if the advisor is dually licensed to work with Canada- and U.S.-based clients and investment assets. Cross Border Wealth can introduce you to one through the Get connected form.
I have received an inheritance from a relative across the border. What do I need to know?
A cross-border advisor can help you open an account appropriate for your loved one’s gift that is consistent with your financial goals and informed by the tax implications of the benefit.
Sources and further reading
- IRS, Rollovers of retirement plan and IRA distributions
- CRA, Certain lump-sum payments from a foreign retirement arrangement (transfers to an RRSP under paragraph 60(j))
- National Instrument 31-103, Registration Requirements, Exemptions and Ongoing Registrant Obligations (OSC)
- IRS Publication 597, Information on the United States–Canada Income Tax Treaty
Related resources
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Chris is a cross-border financial advisor licensed in both Canada and the United States. He helps Americans moving to Canada and Canadians moving to the U.S. keep their retirement accounts intact and build one plan that covers both sides of the border. He writes for Cross Border Wealth in his personal capacity.
Disclosure: Chris writes in his personal capacity; his views do not represent any firm he is associated with. Cross Border Wealth does not provide advisory services. If you need advice, use the Get connected form and we will introduce you to a licensed professional.