Registered Retirement Savings Plans

Published on May 03, 2024
by Clark Stott

Clark Stott has been with Expat Tax Online since 2015. Being a dual national based in the UK, Clark has unique experience helping US citizens (and Accidental Americans) become tax compliant via the Streamlined Tax Amnesty program. Clark likes to help Americans in the UK keep their tax situations as simple as possible to avoid harsh IRS treatment.

Can US expats invest in RRSPs while living in Canada?

Yes, US expats living in Canada can invest in Registered Retirement Savings Plans (RRSPs). This option allows for tax-deferred growth in Canada and benefits from the Canada-US tax treaty.

What should I know about RRSPs?

An RRSP is a Canadian retirement savings plan offering tax-deferred growth, meaning you won’t pay taxes on investment gains until you withdraw funds, typically at retirement when you might be in a lower tax bracket.

How does investing in an RRSP benefit me as a US expat?

Contributing to an RRSP can lower your taxable income, potentially placing you in a lower tax bracket now, with the added advantage of your investment growing tax-free until retirement.

Is it possible for a US citizen to open or contribute to an RRSP when they’re not living in Canada?

Absolutely, US citizens can maintain or open new RRSP accounts from abroad as long as they have taxable income in Canada.

What options do I have within an RRSP?

RRSPs offer diverse investment choices, including mutual funds, stocks, bonds, ETFs, and GICs.

When can I start putting money into an RRSP?

You can begin contributing to an RRSP as soon as you have taxable earnings in Canada and continue until December 31 of the year you turn 71.

What are the main benefits of investing in an RRSP?

Key benefits include: tax-deferred growth, tax deductions on contributions, building retirement savings, potential for income splitting with a spouse, and favorable considerations in estate planning. It’s highly recommended to consult with a financial advisor to maximize these benefits.

When can I withdraw funds from my RRSP?

You can take money out of your RRSP at any point if your plan allows it, but keep in mind that all funds must be withdrawn by December 31 of the year you turn 71, and taxes will be due on each withdrawal.

How do I get started with an RRSP?

To start an RRSP, choose a provider, learn about your investment options, and begin making contributions. Consulting a financial advisor is a smart step to ensure your RRSP is set up to optimize your retirement savings.

Can I transfer my RRSP to someone else?

RRSPs are generally non-transferable except to a spouse under specific circumstances like divorce or legal separation, which uses Form T2220 for the transfer.

How can I receive income from my RRSP?

To receive income from your RRSP, convert it into a Registered Retirement Income Fund (RRIF) or purchase an annuity by the end of the year you turn 71. The option you choose will affect how you receive and are taxed on this income.

What happens to my RRSP if I pass away?

Upon the RRSP holder’s death, the account value is treated as income on their final tax return unless transferred to a surviving spouse or partner, which can defer the immediate tax burden.

This needs to be completed by December 31 of the year following the death. For detailed guidance on these rules and the potential tax implications, consulting with a financial advisor is recommended.