# Accumulating US dollars for retirement spending



## leoc2 (Dec 28, 2010)

Accumulating US dollars
I will be spending 3 months in Florida when I retire in about 3 years’ time. I would like to accumulate US dollars by making a monthly contribution. Currently I can exchange CDN dollars to US dollars in a bank account (near 0% return). I also have a non registered discount brokerage account. Are there any fixed income or low risk US dollar index funds that would do the job (assuming the transaction fee is negligible)? Would withholding tax be a huge detriment? How do CMF’ers stash some US cash? I am trying to keep this separate from my investment portfolio which includes US index funds like VTI... OR perhaps ... Are there winter destinations not in the US I should be considering?


----------



## bayview (Nov 6, 2011)

The way things are going in the USA plus the QE infinity, my guess the USD would be worth less going forward unless you think there is going to be a synchronised global recovery next 1-2 years or a major geopolitical crisis which tends to supports the USD. I would convert from my CAD which probably going to be stronger vis a vis the USD. 

There are talks of the loonie being a potential reserve currency although this is premature.

I know Im not answering your qts about investment avenues to generate USD cashflow for your Florida stay. For less volatility I would say USD short duration bond fund less than 10 years duration but then the whole bond spectrum is a crowded trade nowadays unless the near zero interest rates remain so for the next few years

Im sure other more knowledgeable posters can advise you on the potential avenues.


----------



## slacker (Mar 8, 2010)

Not answering your original question, but be careful when you "exchange CDN dollars to US dollars in a bank account".

I think all of the banks will charge you about 1.5% of the value exchanged. They don't charge this fee to you explicitly, and you will not receive a bill saying that they have charged you this money. Instead, they hide this charge in the form of "worse than market exchange rate". So for example, let's say it is at-par right now, and you should be able to get 1 CDN for 1 USD. Instead, the bank will give you $0.985 USD instead.

It's sneaky, but that's how banks work. This really adds up. Considering you're exchanging $20,000 CAD to USD. The bank will actually charge you $300 just for exchanging to USD.

For small amounts, you probably would just have to suck it up. But for larger amounts (say more than $10,000), you should consider something called Norbert's Gambit.


----------



## kcowan (Jul 1, 2010)

I just pay the exchange rate when I need foreign cash. I am not a currency speculator.

(But then I pay for Mexican Pesos and they are an oil currency similar to the C$ so tend to rise and fall together.)

(PS I don't play cards, golf or eat dinner at 5:30 so Florida offers nothing special.)


----------



## leoc2 (Dec 28, 2010)

kcowan said:


> ... *dinner at 5:30* so Florida offers nothing special.)


Too funny...my brother spends his winters there and that is so true. :emmersed:

Where do you spend winter? Baja mexico?


----------



## Jon_Snow (May 20, 2009)

I want to say kcowan frequents Puerto Vallarta, but I might be wrong on that.

I am a die hard Baja man, spend about a month there yearly, been doing so since 1989, when I was just a youngin' - but look forward to stretching that out to 4 or 5 months eventually. Hope to get to Florida one day, to see what its all about.

*Off topic rant* Having just come back from Mexico, again I am left flabbergasted at the high cost of living in Canada. I can easily live 60% cheaper in the Baja without really trying... *sigh* And the Baja is safer than virtually any major Mexican or US city (and some Canadian ones I would guess). Extreme geographic isolation is a wonderful thing. :chuncky:


----------



## kcowan (Jul 1, 2010)

leoc2 said:


> Too funny...my brother spends his winters there and that is so true. :emmersed:
> 
> Where do you spend winter? Baja mexico?


Puerto Vallarta. I am there now. And the costs are easily half of what Vancouver costs. By spending 6 months here, we have reduced our annual spend by 23% after factoring in an annual trip to Europe. And it is safer than Vancouver. My car insurance is $184 for the year.


----------



## GoldStone (Mar 6, 2011)

Do you know where the safe area ends and unsafe starts? Or is kind of fuzzy?


----------



## Eder (Feb 16, 2011)

Haha...I've been in Florida for the last 3 weeks. I don't eat at 5:30 yet but we like it here. I stay on the Keys so it has a lot more to do than the mainland. I buy my USD when exchange rates are favorable using Canadian Forex . com and have opened a Wells Fargo account to get a bit of a return on my money. You need to be careful to file a closer association form if you start investing in the US to avoid a potential problem with the IRS.... http://www.irs.gov/pub/irs-pdf/f8840.pdf


----------



## leoc2 (Dec 28, 2010)

Eder, do you use that form because you have purchased a home in FLA or because you have opened a bank account?


----------



## kcowan (Jul 1, 2010)

You need it for a US bank account, along with an ITIN. I have one.

BTW The Keys are different than Florida. More like the Caribbean. Except you can drive.


----------



## Eder (Feb 16, 2011)

I use it since I am in the USA 6 months/year...that is is enough to be declared a resident alien and be required to pay taxes in the USA unless you file the 8840 form. Any Canadian can open a USA bank account without doing anything special but it does get LOL when they try entering your SS#.


----------



## kcowan (Jul 1, 2010)

Eder said:


> when they try entering your SS#.


The ITIN replaces the SS# for resident aliens.


----------



## Eder (Feb 16, 2011)

Yeah, I opened my Wells Fargo account as a non resident alien so it took almost 3 hours as the bank tried to work around their computer which didn't like my Canadian SS#.

Same thing happened when I opened my Verizon account and the work around was inserting a bogus USA SS#...that was Verizon's doing not mine lol.


----------



## fraser (May 15, 2010)

We travel to the US fairly often. We also go on cruises and generally buy them from an on line US travel agent because of the savings that we can realize. We also get US dollar cheques from time to time...but not so often anymore.

We became just a little tired of paying high exchange rates on our Visa cards and getting very poor exchange rates at the bank. So we opened a USD savings account and a USD Visa card. NO interest on the former, the latter costs $30 per year. But it does not take long to realize the savings if, like us, we use our credit card instead of cash or debit card. it may be different if savings account interest rates were to increase.

We no longer buy US currency at the bank. We have several foreign exchange stores in close proximity. Our last transaction was to purchase $5K of USD for the USDA bank account. The cost of that at the foreign exchange store was just under $150. Less that what the bank was charging. I simply got the USD and walked across the street to the bank and deposited them in our USD account. While ion line I saw a teller from the bank where I deal....she was doing the same as the rate was better than her employee rate at the bank.


----------



## humble_pie (Jun 7, 2009)

fraser said:


> ... Our last transaction was to purchase $5K of USD for the USDA bank account. The cost of that at the foreign exchange store was just under $150. Less that what the bank was charging.


cost of the identical exchange realized thru 2 gambit trades: less than $20


----------



## leoc2 (Dec 28, 2010)

My US and international equity (VTI/VXUS) is held in my RRSP to maximize tax benefits. My current asset allocation requires me to purchase more US equity. Unfortunately my RRSP is maxed out and I am approaching levels that may trigger US estate taxes. Add to this my desire to accumulate US dollars and I have come up with the following game plan: Use my non-registered account to Buy ZSP (BMO S&P 500 Index) with Canadian dollars and then ask BMO to journal the holding to ZSP.U (US dollar). This would gambit the purchase to my US dollar account. When I retire (with 2 to 5 years) I can sell off part of my ZSP.U holding and use the US funds to fund snowbird holidays. The US estate tax problem is also solved. 

Comments and suggestions please.


----------



## My Own Advisor (Sep 24, 2012)

So, the solution is, most of you hold a US bank account with a US institution? 

Any fees for doing so? Min. account thresholds? 

What are tax implications of holding a few $$ K as a Canadian at a US bank?

We only keep a US cash account with a Canadian bank right now...


----------



## leoc2 (Dec 28, 2010)

My Own Advisor said:


> So, the solution is, most of you hold a US bank account with a US institution?
> 
> ...


No US bank account here.


----------

