What Happens to My 401k If I Move to Canada?

Tiffany Woodfield

Jun 12

8 min read

Updated: Jun 21

“What happens to my 401k if I move to Canada and become a Canadian resident?” This post will cover your options, including the key reason you don't need to move your 401k to Canada.

As a US citizen, dual citizen or Green Card holder, it’s common to get frustrated when you try to find information on what to do with your 401k once you live in Canada.

It often seems like moving your 401k to Canada is an impossible task.

You might be wondering:

Will you have a major taxable event?
How can you avoid it?
Do you have to move all your investments to Canadian currency?
How will you plan income streams now and in the future?

In addition, you cannot seem to find anyone who can help you understand what your options are for moving your 401k to Canada.

But, before we dive into the details, if you’re about to move or you’re planning a move in the next 12 to 24 months, schedule a call with a cross-border advisory firm. If you have substantial assets, it’s critical that you have a guide who can help you navigate the complexities of cross-border financial planning and investment management before any mistakes occur.

Next, if you’ve already moved to Canada, you may need more specific information. We’ve written a comprehensive guide about how to manage your 401k in Canada. So if you’ve already moved, make sure you read that 401k guide HERE.

Written by Tiffany Woodfield, Senior Financial Advisor, Associate Portfolio Manager, CRPC®, CIM®, TEP® and John Woodfield, Portfolio Manager, CFP®, CIM®

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Summary of Key Points:

There are options to move your savings in a 401k to Canada.
You should not use an alternate address in the US while you are actually living in Canada.
Your 401k or 403b will likely become restricted once you reside in Canada which creates unwanted risk as you can’t adjust to market problems in a timely manner.
Having your retirement assets managed where you are living makes it much easier to plan for the future and helps with estate planning.
You can move your US retirement plan to Canada as long as you follow the correct steps.

Moving to Canada with a 401k

Once you move to Canada and are no longer a resident of the US, your brokerage firm may have strict rules that may force you to close your 401k.

Many brokerage firms and employer retirement plans cannot service your account in the same way after you are a resident of Canada. In some cases, the account becomes restricted, which means it can no longer be actively managed.

In other cases, your brokerage firm may send you a letter stating that it cannot manage your registered accounts.

They may send you a letter stating that you have 30-60 days to find another advisory firm or your account will be closed. This can be a startling situation, as suddenly the clock is ticking and you have to find the right solution. In most cases, the best solution is to work with a cross-border wealth management firm that has experience managing investments for Americans in Canada.

Should You Move Your 401k to Canada?

In most situations, the goal isn't to move your 401k to Canada.

A 401k is a US retirement plan and must remain within the US retirement system. It cannot be transferred directly to a Canadian investment account or to an RRSP. When people talk about “moving a 401k to Canada,” they usually mean restructuring the account so it can be managed properly once they are living in Canada.

The main issue is not moving the account itself, but making sure it can still be properly managed once you become a Canadian resident.

Many employer 401k plans have restrictions once you leave your job or move outside the United States. Because of this, people often roll their 401k into an IRA. This can typically be done on a tax-neutral basis and provides more flexibility when it is managed by a financial advisor who works with cross-border clients.

However, it is important to understand that keeping the 401k can also make sense in some cases — if the 401k custodian allows this.

For example, a 401k account is eligible for pension income splitting between spouses in Canada, but the CRA does now allow the same treatment with IRA accounts. Once the account is structured correctly, it can remain in the United States after rolling it into an IRA. It can still be managed in Canada by a dual-licensed advisor as part of your overall cross-border financial plan.

Your goal should be to ensure your retirement assets are structured in a way that allows proper investment management, tax planning, and retirement income planning once you live in Canada.

You Can’t Bring Your 401k to Canada, But You Can Do This

Unfortunately, you cannot directly move a 401k to Canada.

However, one option is to roll over your 401k to an IRA and have it managed by an advisor who is licensed in Canada and the US.

Here’s a quick example:

Peter worked at Stanford University in California as a professor and built up savings in his 403b and 457 retirement plans.

His wife Mary worked at a large IT company and has accumulated significant savings in her 401k. They have now retired and want to move back to Canada to be closer to her parents.

The issue they face is that they don't want to lose a huge chunk of their retirement investments by liquidating their 401k and 403b.

To bring their accounts to Canada, one option is that they can roll over their 401k and 403b into an IRA and have it managed from Canada with a dual-licensed financial advisor. This simplifies their situation and makes it easy to plan an income stream and have investments managed according to their needs.

In other words, this makes it easier for them to enjoy their next adventure without worrying about their investments.

Moving Your US Retirement Plan to Canada

What are the issues if you have a 401k or IRA in the US and you are living in Canada?

SEC Guidelines

If you are living in Canada but have given your US brokerage firm an alternative US address, this is against the Security Exchange Commission (SEC) Guidelines.

It is only a matter of time before you receive a letter stating you have 30-60 days to find another advisor who can manage your account or it will be liquidated, resulting in a major taxable event. Not only is it against the guidelines to use a friend or relative’s address in the US, but when you start taking out required minimum distributions, it may cause state tax issues. The last thing you want when living in Canada is to have tax issues in the US.

Frozen Assets

If you don’t move your account, your 401k or 403b will be essentially frozen and not actively managed.

What this means is if you keep the investments in the US and are now a non-resident, your brokerage firm’s hands are tied and they can no longer make changes to your account according to your needs. This creates unwanted risk as you aren’t actively protected from market problems. In addition, if you have investments at several firms, you can be overexposed in some areas and underexposed in other asset classes.

Then it is up to you to look at all your statements and make sure they collectively reflect your risk tolerance. This can be stressful, and it’s much simpler if you have your entire portfolio handled by a single wealth management team.

Income Streams

It is difficult to plan income streams or contingency plans when you are living in one country and your advisor doesn’t have experience with clients in your situation.

If you aren’t sure of the rules or penalties, you can end up paying more to taxes than necessary. There are even special considerations if you live in Canada and your beneficiaries are in the US.

You may question if you can have a Canadian RRSP and a 401k. Or you might wonder what to do if you have a 401k as a Canadian working in the US. These issues can be easily taken care of by a cross-border financial advisor who can create a plan based on your goals and needs.

Moving Your US Retirement Plan to Canada

What Should You Do?

It can feel overwhelming as a US person living in Canada and trying to plan your financial future.

Having a cross border financial advisory team who can explain and simplify things for you provides relief. A cross-border financial advisor will have a network of cross-border accountants and lawyers that can help you avoid the common pitfalls which often result in a large tax bill.

A cross-border financial advisor will help you avoid unnecessary taxes while optimizing your investments and income streams for both sides of the border.

Common Questions

What happens to my 401k if I move to Canada?

Your 401k does not disappear when you move to Canada. However, your US brokerage firm may restrict the account once you become a non-resident. Many people explore restructuring their accounts so they can be managed by a cross-border financial advisor.

Can I keep my 401k if I move to Canada?

Yes, in many cases, you can keep your 401k. The main issue is whether your brokerage firm allows accounts for clients who live outside the United States. If they do not, you may need to transfer or restructure the account.

Can I move my 401k to Canada?

A 401k cannot be transferred directly into a Canadian retirement account. In some situations, people roll their 401k into an IRA and work with an advisor who is licensed in both Canada and the United States.

Can I transfer my 401k to an RRSP?

You cannot directly transfer a 401k to a Registered Retirement Savings Plan (RRSP). However, Canadian tax rules may allow a lump-sum withdrawal from a US retirement plan to be contributed to an RRSP in the same year. This strategy requires careful tax planning because a US withholding tax normally applies. It is rarely tax neutral and often results in a significant U.S. tax liability that cannot be fully offset by claiming a foreign tax credit in Canada.

How can I move my 401k to Canada?

Many people begin by reviewing their options with a cross-border financial advisor. Depending on the situation, solutions may include rolling the 401k into an IRA, restructuring investments, or coordinating withdrawals with Canadian tax planning.

About the Author

TIFFANY WOODFIELD

Tiffany Woodfield is a Portfolio Manager licensed in Canada and the USA, a Chartered Investment Manager (CIM), a Chartered Retirement Planning Counselor (CRPC), a Trust and Estate Practitioner (TEP) and the co-founder of SWAN Wealth Management, along with her husband, John Woodfield. Tiffany advises clients who live in Canada and the United States and want to simplify their cross-border financial plan, move their assets across the border, and optimize their investments to minimize their tax burden. Together, Tiffany and John Woodfield help their clients simplify their cross-border finances and create long-term revenue streams that will keep their assets safe whether they live in Canada or the U.S.

JOHN WOODFIELD

John Woodfield is a Financial Management Advisor (FMA), a Chartered Investment Manager (CIM), and a Certified Financial Planner (CFP), and in 2007 was inducted as a fellow of the Canadian Securities Institute (FCSI). As a portfolio manager and CFP®, he works with clients across Canada. John Woodfield’s clients are families, individuals and business owners who understand the importance of comprehensive wealth and investment plans driven by the lifestyle they want to lead.