7 Tips for Retiring to Canada
By Maryalene LaPonsie, Contributor
The stormy political climate in the U.S. has some people dreaming of life in a country where calm and civility reign supreme. For many, Canada is that country.
“It’s the kinder, gentler neighbor up north,” says Nuri Katz, president of Apex Capital Partners and an immigration and residency planning expert, repeating an oft-used description of the country. However, moving there isn’t as easy as people might think. “Canada is a separate country,” Katz says. “It’s not the 51st state.”
Before you head for the border, consider these tips for retiring to Canada.
1. Living in Canada part time is the easiest route. While traveling to Canada is relatively easy for U.S. citizens, retiring there permanently is a different story. Katz explains immigrants must fit specific criteria such as being a skilled employee or have Canadian family members willing to sponsor them. When applying for entry through some immigration programs, age may be a factor, making it difficult for older Americans to gain permanent residency. Fortunately, you don’t have to jump through any hoops if you’re willing to split your time between the U.S. and Canada. You could buy a second home in the country and stay in it for up to six months of the year as a tourist.
2. Seek out immigration experts if you want permanent residency. Jordan Waxman, managing partner at HSW Advisors at HighTower in New York City, was born in Montreal and says Canada is a great place to retire. “Obviously, I’m Canadian, so I’m a little biased, but I think it’s a gorgeous country,” Waxman says. However, like Katz, he says the immigration process isn’t necessarily easy or simple.
To save time and avoid costly mistakes, Waxman recommends contacting an immigration attorney to discuss your options. Using a professional familiar with Canadian tax laws is also essential. That person can walk you through the process of having assets properly appraised and trusts set up to protect your finances should you pass away while in the country.
There is a federal goods and services tax of 5 percent on most purchases. Plus, most provinces have their own sales tax or apply a harmonized sales tax that combines federal and provincial levies. Those combined taxes are as much as 15 percent in the Maritime Provinces. Alberta and the Northern Territories do not have a provincial tax, so only the 5 percent GST applies in those areas.
4. Understand your U.S. and Canadian tax-filing requirements. Not only is the sales tax different in Canada, but income-tax rules diverge significantly from the U.S. as well. “It’s a whole different tax world,” Lovell says. In particular, Canada offers limited deductions, which can make it hard to reduce tax liabilities. Before moving, Lovell recommends his clients run a simulation to see what their taxes will be like. “Let’s pretend you actually live in that country and see how the rates affect you,” he says.
What’s more, U.S. citizens living abroad still need to file U.S. returns. While double taxation isn’t a concern, thanks to foreign income and housing exclusions, Lovell says there are specific disclosure requirements for foreign bank accounts. Failure to file the correct forms could result in stiff penalties.
5. Buy international health insurance before you go. Canada ranked 10th for retirement security in Natixis Global Asset Management’s 2016 Global Retirement Index, in large part because of the excellent health insurance coverage it provides to residents. However, that coverage isn’t going to help you if you are living there part time and get sick. Your U.S. policy probably won’t pay your expenses, either. Before moving north, make sure you have a health insurance plan that will cover you on foreign soil.
6. Leave your U.S. car at home. Lovell says some of his clients have made the mistake of trying to take their cars with them to Canada. “It gets very expensive,” he says. “The car might not be worth it.” That’s because Canada has very different emissions and safety standards than the U.S. Before a vehicle can be legally licensed in the country, it must be modified to meet government requirements.
7. Don’t relinquish your U.S. citizenship. For those tempted to give up their citizenship in response to the current state of political affairs, Lovell has this advice: Don’t do it. He’s seen too often someone leave the country for a few years and then decide to return. Unfortunately, it can be an uphill climb to reclaim citizenship once it’s been relinquished.
There may be obstacles, but that doesn’t mean you still shouldn’t consider retiring to Canada. “It’s a fantastic place,” Waxman says. “It’s a great country.” Just be sure to do your homework before packing your bags.