Withdrawing from RRSP

[vanee 13]

I left my RRSP in Canada when I moved to the US. Like everyone else's, the amount has gone down in the past couple of months. Mine has dropped in value by over 20%. It may have increased slightly in the past few days, but it'll probably lose more value.

I probably wouldn't withdraw from my RRSP as long as it was continuing to build a nest egg. But since it's now losing value fast, and a chunk of money would come in really handy right now, I'm considering withdrawing a few thousand dollars from it.

Pros:

• We'd have money that would be really useful right now (not for anything frivolous).
• We'd be taking money that we might be losing anyway. If I'd withdrawn this money 2 months ago, it would be money that I would've lost, so why not use it before it goes down the drain?

Cons:

• We'd have to pay 25% Canadian tax on it, and I don't think I could get any of that money back as I'm not earning money in Canada any more.
• With the exchange rate what it is, we'd lose money converting from CAD to USD.
• We'd have to pay the bank conversion rate on top of the other costs.

What are your opinions on withdrawing money from retirement funds at this time? Thanks for your thoughts on this.

[pilotayo 0]

I also have some RRSPs and Non-registered investments, although I haven't moved yet, I am NOT planning on touching the RRSPs, I hope i'm not forced to withdraw from the non-registered stuff too because while i won't have the tax problem, the exchange rate is not good. But from the taxes withheld on the RRSPs and the dismal conversion rate, if you're not in an absolute bind, I wouldn't touch the money. Since it's retirement money, if you have 3-4 yr horizon out, it will recover and if you have a lot more time then you should be fine. It just seems like a double whammy with the tax and exchange rate so bad.

[SapphireDreams 71]

If you're not planning to retire within the next 15-20 years I wouldn't touch it. The market is going to go back up, it's inevitable.

[MsZ 6]

I wouldn't touch it, either.

Cashing out now guarantees a loss. Waiting allows for the possibility of recovery.

[Texanadian 10]

You can always invest it in similar funds on the US side after taking the money out of Canada. As a bonus, you'll pay about half of the yearly expenses as you would in Canada (if you're talking about mutual funds).

Some day the Canadian government will up the non-resident tax from 25% to something higher. It used to be 15% at one point in time. It's an easy way for them to raise taxes without losing votes from complaining citizens.

[Flames9_RN 358]

I withdrew my RRSP's a few yrs back when the Cdn$$ was in the 60 cent range, ouch!! Not sure why I did it, but I did,lol I belive Canada immediately took off 25% for taxes, ouch!! I then used CustomHouse.com to tx the $$$ from my Canadian bank acct to my USA one. Much better exchange rate and no fees.

When you cease to be a resident of Canada,ensure u let ur financial institution that is overlooking ur RRSP's know. They will send u a form to fil out. As well for the IRS,you have to fill out form 8891

http://ftp.irs.gov/pub/irs-pdf/f8891.pdf

[Hopeful 0]

I ended up leaving my RRSP's in Canada, but learned a big lesson after the fact. Once you are in the U.S., many financial institutions in Canada will no longer trade on your account. That means that if you want to make changes to the mutual funds you're in, you may be stuck, which is my case. With the market in the tank, I wanted to make some substantial changes to the funds I invest in, and my investment company flat out refuses to do it, as I am a non-resident of Canada. This is not the same as adding new $ to your RRSP's, because once you leave, you won't be earning CDN. income in order to make new contributions. This is only dealing with the funds you already have there.

So, if you decide to leave them there, you should confirm that they will continue to allow you to make changes to your portfolio once you leave. Get it in writing. And if they won't, you should move them to a company that will before you move to the U.S.

As flames said, it's also very important to file an 8891 form every year you are in the U.S.

[Flames9_RN 358]

I belive, probably wrong, once you are anon-resident of Canada,one can't make adjustments to the RRSP's, Its a law, not just related to 1 financial institution! Form 8891 is a pretty easy form to fill out!! The day you cease to be a Cdn resident, you should mark down what your RRSP are worth that day, I think if you ever take them out when ur a USA resident, that figure will come in handy, not positive though,lol

[Hopeful 0]

What I've found out is that it's not necessarily against the law, but the broker has to be registered to trade in the state you live in, among other things. It's possible that TD Waterhouse might have this arrangement...here is the link to a discussion that talks about it:

http://www.financialwebring.org/forum/view...045a4e618020e0f

[vanee 13]

Thanks for the responses, everyone. Normally I'd be right with those of you who advised not to withdraw from one's RRSP. But there's a good chance that I will be withdrawing a few thousand dollars soon. It's money that I might lose if I left it there (I've already lost more than a few thousand dollars), but more important, it'll be used for something that will help us save money. And I hope to be able to pay it back but to a US retirement fund in within a couple of years.

I didn't know that mutual funds have lower expenses here than in Canada, and that's an added benefit. The money might earn us more in a US retirement fund than in a Canadian one. And thanks for the reminder about Custom House. That'll save us a lot.

I appreciate all the information and all the points of view. This is the place to come with questions like this.