New Hampshire Move - 401K to Roth Conversion

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.
Post Reply
Danielle105
Contributor
Contributor
Posts: 27
Joined: 15 Jan 2017 07:08

New Hampshire Move - 401K to Roth Conversion

Post by Danielle105 »

At 65, I am thinking it would make sense to move to New Hampshire from Connecticut, and over the next 5 years, convert most of a 401K to a Roth IRA, before even considering moving back to the Province of Ontario. Sound like a plan? (There's no State income tax in New Hampshire.)
User avatar
Peculiar_Investor
Administrator
Administrator
Posts: 13271
Joined: 01 Mar 2005 14:52
Location: Calgary
Contact:

Re: New Hampshire Move - 401K to Roth Conversion

Post by Peculiar_Investor »

I was going to first ask about your citizenship, but then checked your previous posts and found some background in another topic:
Danielle105 wrote: 15 Jan 2017 07:53 I am a Canadian that's been residing in the USA for over 30 years. The example individual stock portfolios, I see here, often resemble the sector balance of the S&P 500 to a large degree.

Now retired, I have been considering returning to Canada and turning in my green card. I have no family members in the USA. My pension money is fixed in US$.
Are you considered a resident or non-resident of Canada for tax purposes?
Imagefiniki, the Canadian financial wiki New editors wanted and welcomed, please help collaborate and improve the wiki.

Normal people… believe that if it ain’t broke, don’t fix it. Engineers believe that if it ain’t broke, it doesn’t have enough features yet. – Scott Adams
Danielle105
Contributor
Contributor
Posts: 27
Joined: 15 Jan 2017 07:08

Re: New Hampshire Move - 401K to Roth Conversion

Post by Danielle105 »

I believe that I am a non resident as I was transferred to the USA in 1983, and have USA permanent resident status. I have lived in the USA since 1983.

I have not written to the CRA for any kind of verification of status.
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

Re: New Hampshire Move - 401K to Roth Conversion

Post by brucecohen »

I can't comment on your plan but here is an on-point article.

Well before returning to Canada confirm that the organization holding your retirement plan will let you trade in it once you become a full-time Canadian resident.

If you made any contributions to CPP or QPP before moving to the US make sure you tell US Social Security about that so your benefit can be totalized under the Canada-US Social Security Treaty.
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33398
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: New Hampshire Move - 401K to Roth Conversion

Post by AltaRed »

I am guessing the OP has little to no 'value' built up in Canada having left in 1983. Thirty-four years of absence pretty much means a lifetime. Likely means no OAS, no CPP, etc. The OP needs to pay most attention to how to ensure trading rights with US domiciled accounts, Social Security, etc. before entering Canada.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
Danielle105
Contributor
Contributor
Posts: 27
Joined: 15 Jan 2017 07:08

Re: New Hampshire Move - 401K to Roth Conversion

Post by Danielle105 »

I find I do sometimes questions the wisdom of making conversions when the market it at record highs. On the other hand I am thinking future market performance is difficult to predict and I should get conversions into a Roth done where I can find the lowest tax rate.
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

Re: New Hampshire Move - 401K to Roth Conversion

Post by brucecohen »

AltaRed wrote: 29 Dec 2017 22:15 I am guessing the OP has little to no 'value' built up in Canada having left in 1983. Thirty-four years of absence pretty much means a lifetime. Likely means no OAS, no CPP, etc.
I wouldn't dismiss CPP. I left the US more than 40 years ago with only 8 years of Social Security contributions -- 2 years shy of the minimum needed for a pension. I expected very little but thanks to totalization -- whose mechanics I don't understand at all -- I get nearly US$400/month. It's taxed only by Canada and 15% is tax-free. I believe the totalization agreement will also make the OP eligible for OAS but I'm not sure of that and don't know the details. The important point is that she should tell Social Security about her Canadian experience and let them and their Canadian counterparts figure it out.
Danielle105
Contributor
Contributor
Posts: 27
Joined: 15 Jan 2017 07:08

Re: New Hampshire Move - 401K to Roth Conversion

Post by Danielle105 »

I have applied for CPP and OAS. I have not applied for Soc Sec. I do have Medicare now.

Unfortunately I only have 28 years of Soc Sec contributions. (I expect I will be affected by WEP)
Dogger1953
Contributor
Contributor
Posts: 397
Joined: 04 Mar 2013 21:00

Re: New Hampshire Move - 401K to Roth Conversion

Post by Dogger1953 »

brucecohen wrote: 30 Dec 2017 09:28
AltaRed wrote: 29 Dec 2017 22:15 I am guessing the OP has little to no 'value' built up in Canada having left in 1983. Thirty-four years of absence pretty much means a lifetime. Likely means no OAS, no CPP, etc.
I wouldn't dismiss CPP. I left the US more than 40 years ago with only 8 years of Social Security contributions -- 2 years shy of the minimum needed for a pension. I expected very little but thanks to totalization -- whose mechanics I don't understand at all -- I get nearly US$400/month. It's taxed only by Canada and 15% is tax-free. I believe the totalization agreement will also make the OP eligible for OAS but I'm not sure of that and don't know the details. The important point is that she should tell Social Security about her Canadian experience and let them and their Canadian counterparts figure it out.
Hi Bruce - The mechanics of totalization are quite simple. They affect only whether or not you meet the basic eligibility requirements for a benefit from either/both countries. Beyond that, they do NOT affect the amount of any benefit from either country. In your case, they allowed you to meet the minimum 10-year requirement for a US social security pension, but the amount of your US pension would have been based solely on your 8 years of US earnings/contributions.

In Danielle's case, it appears that she will currently only have about 13 years of residence in Canada after turning age 18. Since she currently lives outside of Canada, she needs 20 years of Canadian residence to qualify for OAS, so without the agreement she wouldn't qualify for OAS at all. With the agreement she will qualify but the amount will be based solely on her 13 actual years of Canadian residence, meaning that it will be approx. 13/40ths of the full basic OAS of $585.49 = $190.28 monthly.

There is no minimum requirement for CPP, so the agreement isn't necessary at all. The amount of her CPP will be based on her total pensionable earnings in Canada averaged over 39 years. At maximum, her CPP would be 13/39ths of $1,114.17 = approx. $371.
DR Pensions Consulting (http://www.DRpensions.ca)
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

Re: New Hampshire Move - 401K to Roth Conversion

Post by brucecohen »

Thanks Doug!
Danielle105
Contributor
Contributor
Posts: 27
Joined: 15 Jan 2017 07:08

Re: New Hampshire Move - 401K to Roth Conversion

Post by Danielle105 »

Even though I am convinced I could save a lot of money doing Roth conversions in New Hampshire, I suspect I may just stay in Connecticut a few more years. I want to stay within a few hours of Connecticut. I spent a lot of hours looking on Zillow, and I did not see anything that really seemed to make sense to me at this time. I did searches around the Keene and Lebanon. Most of what I saw was looked just didn't inspire me to travel up there for a closer look.

Perhaps I have just reached an age where an adventure to a new location without family or friends is more than I can handle. Perhaps it's not always about the money.
Post Reply