RRSPs, 401(k)s, and IRAs Across the Border: The Retirement Guide (2026)

The core principle: Article XVIII

Treaty Article XVIII says pensions and annuities are generally taxable only in your country of residence. The source country may still withhold tax on periodic payments (capped at 15%), but the residence country gives a foreign tax credit so you do not pay twice. Everything below is a variation on this theme — with very different details per account.

RRSPs held by US residents

The problem: the US does not treat an RRSP as a qualified retirement plan. Without the treaty, the income accruing inside your RRSP — interest, dividends, capital gains — would be taxable to you in the US every year, even though Canada defers it.

The fix is Article XVIII(7): a US resident who is a beneficiary of a Canadian retirement plan may elect to defer US taxation on the inside growth until distribution. Since IRS Revenue Procedure 2014-55, this deferral is automatic for eligible individuals — the old Form 8891 is retired and you no longer file anything to claim it. (If you filed 8891s in ancient years, stop; the procedure replaced them.)

When you withdraw, the picture flips:

• Lump-sum RRSP withdrawal: Canada withholds 25% under Part XIII of the Income Tax Act, section 212(1)(l). The treaty gives no reduction — the 15% cap applies only to periodic pension payments, and a lump sum is not periodic. The US then taxes the full withdrawal as ordinary income, with a foreign tax credit (Form 1116) for the Canadian withholding.
• Periodic RRIF payments: convert the RRSP to a RRIF and take payments within the periodic limits, and the treaty caps Canadian withholding at 15%. To get the reduced rate, you (or your financial institution) file Form NR301 with the CRA to certify treaty eligibility — without it, the institution withholds the full 25%.
• The planning implication: collapsing a $200,000 RRSP as a lump sum costs $50,000 in Canadian withholding; converting to a RRIF and drawing it down periodically costs 15% on each payment. The RRIF route also spreads the US tax over years instead of bunching it into one high-bracket year.

One more trap: do not contribute to an RRSP while a US resident expecting a US deduction — there is none. And Canadian mutual funds or ETFs held inside the RRSP are fine, but holding them in a taxable account as a US resident raises the PFIC problem (punitive US tax regime for passive foreign investment companies) — keep foreign funds inside the RRSP wrapper.

401(k)s and Traditional IRAs held by Canadian residents

The mirror image works more smoothly. Canada recognizes 401(k)s and Traditional IRAs as pensions under the treaty, so:

• Growth stays tax-deferred in Canada — no annual Canadian tax on the inside buildup, matching the US treatment.
• Distributions are taxable in Canada as pension income in the year received. The US withholds 30% on lump-sum distributions to non-residents (no treaty reduction for lump sums, same rule as RRSPs going the other way), and Canada gives a foreign tax credit for the US withholding.
• Do not "fix" it before moving: rolling a 401(k) into an IRA is generally fine, but cashing out or converting to Roth right before becoming a Canadian resident can trigger US tax at the worst moment. The treaty protection depends on the account keeping its pension character.

Required minimum distributions (RMDs): the US requires RMDs starting at age 73 (75 for those born 1960 or later, under current law). Canada has no equivalent rule for foreign accounts — but the RMD is still taxable pension income in Canada when received. Plan the currency conversion: RMDs force withdrawals on the IRS's schedule, not yours.

Roth IRA: the account that needs a deadline

The Roth is the dangerous one, because its US tax-free status does not automatically survive the move to Canada. The CRA's published position (Income Tax Folio S5-F3-C1) is blunt: income accruing in a Roth IRA is generally taxable in Canada on a current, annual basis unless you act.

The rescue is a one-time, irrevocable election under Article XVIII(7) to treat the Roth IRA as a pension:

• Deadline: file with the CRA by April 30 of the year following the year you became a Canadian resident (at the same time as your first Canadian return). Miss it and the election is gone — the Roth's growth becomes taxable in Canada every year.
• No Canadian contributions: you must not contribute to the Roth IRA while a Canadian resident. A "Canadian contribution" contaminates the account — the CRA splits it into two parts, and the contaminated part loses pension status permanently.
• Distributions: with a valid election and no Canadian contributions, qualified Roth distributions (tax-free in the US — generally account open 5+ years and owner 59½+) are also tax-free in Canada under Article XVIII(1).

If you are moving to Canada with a Roth IRA, the election is the single highest-value piece of paperwork in your entire move. Calendar it before you pack.

What about employer pensions and Social Security/CPP?

• US Social Security paid to a Canadian resident: taxable in Canada, with the US allowed to withhold up to 15% under the treaty (in practice, the Windfall Elimination Provision and totalization rules add wrinkles — get advice if you split a career across both countries).
• CPP/OAS paid to a US resident: Canada withholds 25% by default, reduced to 15% under the treaty for periodic pension payments.
• The totalization agreement between the US and Canada coordinates coverage (which country's social security system you pay into), not benefits taxation. Generally you pay into the system where you work; detached workers on temporary assignment (up to 5 years) can stay in the home system with a certificate of coverage.

Three strategies, depending on direction

Moving Canada → US with a big RRSP: usually keep it. Let XVIII(7) defer the US tax, convert to a RRIF at the right age, and draw down periodically at 15% withholding. Collapsing early means 25% Canadian withholding plus US ordinary-income tax in one year — rarely optimal.

Moving US → Canada with a 401(k): usually keep it. Canada defers too. Avoid Roth conversions in the arrival year (the conversion income would be taxable in Canada). Consider conversions in low-income years before the move.

Moving US → Canada with a Roth IRA: file the XVIII(7) election on time, never contribute again while resident, and enjoy tax-free qualified distributions in both countries. This is the best outcome of the three — but only with the paperwork done.