Is Canada on your list as one of the places you are considering moving to in retirement? It is essential to think about the various outcomes that can result from this choice if you spend your retirement up north. Most Americans think it’s easy to move to Canada. Because our countries are so closely connected, Americans have a special pathway. According to Cori Carl, author of “Moving to Canada: A Complete Guide to Immigrating to Canada Without an Attorney,” who resides in Toronto, Ontario, that’s not how things work. There is no easy route for U.S. citizens when retiring in Canada.
Consider the following factors before settling in for your golden years in Canada:
- What kind of visa and residency requirements to look into applying for?
- How this will affect your current tax situation?
- What will the going rate for housing and food be?
- Your plans for retirement and the kind of lifestyle you envision for yourself.
Consider putting the following suggestions to use as you sort through the logistics of retiring in the north of Canada.
Consider Whether or Not You Wish to Act as a Tourist.
When entering Canada, citizens of the United States, regardless of age, are given an automatic tourist visa for a maximum of 183 days. You need to fill out a short amount of paperwork to be granted permission to extend your stay if you would like to remain here for a more extended period. In Canada, it is possible to open a bank account and buy a second home while visiting the country on a tourist visa. Carl claims he had done this before and never once ran into trouble at the bank or the border.
Those contemplating spending their retirement years in two or more locations might consider this possibility seriously. Living in Canada for the remaining six months of the year might appeal to someone who resides in the south of the U.S. for six months. Based on this arrangement, you will be treated as a citizen of the United States and will be required to pay taxes in that country. You will no longer be required to pay taxes in Canada and will not be eligible for Canadian health insurance coverage.
Investigate Your Choices Regarding Visas.
You are eligible to apply for the Parent and Grandparent Super Visa if you have either children or grandchildren living in Canada. With this particular visa category, you could stay in Canada for up to two years at a time, for a combined total of ten years. On the other hand, it does not grant access to provincial health coverage or any other benefits associated with residency. To qualify for this super visa, your child or grandchild must be a Canadian citizen or permanent resident and write a letter promising to support you financially during your visit. In addition, you must meet specific other requirements.
Comprehend the Involvements Involved With Permanent Residency
Permanent residency is available to applicants who wish to stay in Canada for more than 183 days per year or do not qualify for a family super visa. You will be eligible for services provided by the Canadian government, such as medical care, once you have become a permanent resident. The path to citizenship in Canada can begin with applying for permanent residency.
Canada does not have a retirement visa. The immigration program known as “Express Entry” is one of the ways to obtain permanent residency in Canada. Those who want to run a business in Canada and have specific skills should apply for this program. Completing studies at a Canadian university or current employment in a designated field may qualify applicants for immigration programs offered by a subset of Canada’s provinces. These could be viable immigration options for you if you intend to have a second career after retirement and are looking at working for several years.
Don’t Overlook Taxes
Moving to Canada does not require you to relinquish your citizenship in the United States of America. You can collect Social Security benefits even if you live in another country; however, if you earn additional income, you will still be required to pay taxes in the United States. This is because the United States of America employs a citizen-based tax system. According to Nathalie Goldstein, CEO of MyExpatTaxes, who was born in San Jose, California, but currently resides in Vienna, Austria, Retirees in Canada may still owe U.S. taxes on their U.S. income from retirement as well as other Canadian income. Goldstein is originally from California and currently makes her home in Austria.
A tax treaty between the United States and Canada specifies which nation has the right to impose taxes on certain items, such as Social Security benefits and other forms of income from retirement abroad. Suppose the tax treaty states that the United States still holds taxing rights. In that case, American retirees need to plan their money wisely since it is most likely that they will be giving the Internal Revenue Service (IRS) a portion of it back every April 15th, says Goldstein. If the tax treaty does not state that the United States still holds taxing rights, then no such planning is necessary.
Suppose you earn money from anywhere in the world. In that case, you might need to declare it to the Canada Revenue Agency, which is like the United States Internal Revenue Service but for Canada. According to Goldstein, at first glance, it may seem as though U.S. retirees will be subjected to double taxation by both the U.S. and Canada. However, this is not the case if they can optimize their tax return by using the benefits defined in the United States and Canadian tax treaty and other ex-pat tax reliefs. Foreign Earned Income Exclusion and Foreign Tax Credit are two of these.
Take into account the Cost of Living.
Your day-to-day costs could be lower or higher in Canada, depending on the region you choose to live in and the lifestyle you lead. Housing costs are lower, and permanent residents receive free health care, says Troy Daum, a financial planner and founder of Wealth Analytics in San Diego. Daum has worked with clients planning to retire in Canada and found that Canadians have a positive attitude toward foreign retirees. However, many people are shocked when they discover that the cost of virtually everything else in Canada is higher. Sales taxes may be higher here than they are where you currently live. According to Daum, most food items are imported from the United States and are expensive.
Suppose you intend to drive a car in your new location. In that case, your current vehicle might need modifications to comply with the Canadian government’s emissions and safety standards. According to Daum, the cost of gasoline is significantly higher in Canada, and your expenses may exceed what you’re already paying for gas.
You might need to purchase international health insurance if you only spend a few months of the year in Canada and don’t become a permanent resident. Before going to Canada, Daum recommends that you seek health insurance that will cover you if you become ill. Medicare generally cannot be used to pay for medical treatment abroad.
Consult with a Qualified Individual.
Before moving to the north, consulting with a lawyer or a financial advisor may be beneficial due to the legal and economic complexities, the decisions regarding residency and visas, and the various costs associated with the transition. Find a qualified individual who is familiar with issues from both the American and Canadian points of view to assist you in determining the possible effects that relocating to Canada could have on your finances. Review your savings for retirement, the approximation of the cost of living in the new location, and the anticipated amount of Social Security benefits. The next step is to consider your travel, lifestyle, and health insurance preferences before selecting where to spend your retirement.