How to Manage U.S. Retirement Accounts After Moving to Canada

How to Manage U.S. Retirement Accounts After Moving to Canada

For individuals residing in Canada with U.S. retirement accounts, navigating retirement planning can involve additional complexities and cross-border considerations.  One of the big questions that often comes up is: what happens when you start taking Required Minimum Distributions (RMDs) from your U.S. retirement accounts?

These withdrawals—mandatory under U.S. law once you reach age 73 (increasing to age 75 for those born in 1960 or later)—may not just affect your taxes. They can also impact your eligibility for government benefits in Canada, particularly Old Age Security (OAS) and certain provincial programs.

What Are RMDs?

In the U.S., tax-deferred accounts like IRAs and 401(k)s allow you to grow investments without paying tax each year, similar to RRSPs in Canada. But once you hit a certain age, the IRS requires you to withdraw a set amount annually—the RMD, akin to a RRIF withdrawal. These withdrawals are fully taxable as regular income in the U.S.

For U.S. retirement account holders who live north of the border, it gets trickier. Thanks to the Canada–U.S. Tax Treaty, those withdrawals are also taxed in Canada, but you usually get credit for any U.S. tax withheld. In other words: you won’t be double-taxed, but your Canadian income line will go up.

Why This Matters in Canada

Here’s where RMDs collide with Canadian benefits:

• Old Age Security (OAS): OAS is reduced once your net income goes over a certain threshold (around $94,000 CAD in 2025). If your RMDs are large, they can push you over that line and trigger a claw back.

   

• Other Income-Tested Programs: Some provincial credits or seniors’ benefits—such as drug coverage or property tax assistance—are based on net income. Higher income from RMDs can reduce or eliminate those supports.

   

• Guaranteed Income Supplement (GIS): For lower-income seniors, RMDs can also affect GIS, but since GIS applies to a smaller group, the bigger concern for most dual citizens is the OAS claw back.

   

A Helpful Tool: Pension Income Splitting in Canada

Here’s some good news. In Canada, certain types of retirement income—including foreign pension income like U.S. RMDs—may qualify for pension income splitting.

This means you can allocate up to 50% of eligible pension income to your spouse (if you’re both Canadian residents). Doing so can:

• Lower your overall family tax bill if one spouse is in a higher tax bracket

   

• Help keep each spouse’s income below OAS claw back thresholds

   

• Preserve eligibility for some provincial income-tested benefits

   

Planning Ahead

If you’re a U.S. retirement account holder living in Canada, here are a few strategies to consider:

• Withdraw early and gradually: Taking smaller withdrawals before OAS eligibility can smooth out your income.

   

• Think about Roth conversions: Roth accounts don’t have RMDs, but special tax filings are needed in Canada to keep them tax-sheltered.

   

• Use income splitting wisely: Splitting pension income can reduce taxes and protect benefits.

   

• Get professional cross-border advice: Working with a specialist such as MCA Cross Border Advisors Inc. can help you navigate both tax systems, run multi-year projections, and decide when and how to draw down yourS. accounts while protecting your Canadian benefits.

   

The Bottom Line

RMDs aren’t just a U.S. tax issue—they can have real consequences for your Canadian retirement benefits. The OAS claw back and reduced provincial credits are the most common concerns.

But with careful planning, especially making use of tools like pension income splitting and qualified cross-border advice, you can minimize the impact and keep more of your hard-earned savings working for you.

.