Blog post

QUESTION

Hi Phil,

I recently moved to Vancouver from California with my husband and two kids. He got a great job offer here, and we decided to make the move for better work-life balance and to be closer to his family. While I’ve been focused on getting our kids settled into their new school, I’ve also been trying to figure out our financial situation—specifically, what to do with my Roth IRA.

I’ve had my Roth IRA for over a decade, and it has around $200,000 in it. I know I can’t contribute to it anymore now that I’m a Canadian resident, but I’m confused about whether I need to report it to the CRA or make any tax elections.

I’ve heard mixed things about how Roth IRAs are treated in Canada. Some say that I need to file a special tax election to maintain its tax-free status here. Others say that any withdrawals I take could be taxable in Canada. I don’t want to screw this up, especially since I might need to tap into this money in a few years.

My main questions:
– Can I keep my Roth IRA in the U.S., or do I need to transfer it somewhere else?
– Do I need to file any special paperwork in Canada?
– If I take withdrawals, will they be taxed here?
– Should I consider converting any of my traditional IRA to a Roth before I fully settle in Canada?

I appreciate any advice you can provide. Your content has been incredibly helpful!

Best,
XXXXX

ANSWER

Hi XXXXX

Thanks for the email and congrats on your move to Canada!

Let me do my best to provide some guidance and feel free to sign up for a complementary cross-border consultation if you need additional help.

To answer your questions below:

• In some cases you can keep your ROTH in the US, however most US brokers cannot manage investment accounts for Canadian residents. You’ll likely want to move it to a cross-border investment advisor that can work with your US investments directly from Canada (this is something we can help with).
• Yes, you’ll need to file an election for the ROTH IRA in the year you become a Canadian tax resident. For example, if you moved to Canada in 2024 you’ll need to file the election in early 2025. The election is filed with the Competent Authority rather than CRA. You can read more about the ROTH IRA election here. Once the election is filed you won’t be able to contribute further to the ROTH, however it will now be fully deferred from both US and Canadian tax going forward. Make sure that you’ve properly documented beneficiaries on the account.
• No, if you take withdrawals from the ROTH they will not be taxed in Canada, assuming they are also tax-free withdrawals in the US.
• If you’ve already moved to Canada and are currently a tax resident it’s likely too late to make the IRA conversion. However, if you’re still not a Canadian tax resident, and your income is relatively low, this can make sense. By converting traditional IRA money to a ROTH account you’ll be able to withdraw future funds in Canada and save a significant amount of tax compared to withdrawals from a traditional IRA. You can learn more about ROTH IRAs on our podcast here.

Hope the information above has been helpful and as I mentioned please feel free to take advantage of our complementary cross-border consultation here:

www.beaconhillwm.ca/meet

Cheers

Phil