# Any tips on how to plan finances for early retirement in another country



## vimmm (Feb 27, 2011)

Although it is a bit early for me to think about retirement, but I would like to understand and better prepare for it as early as possible. Lets say that when I'll retrie, I'll move to live in another country were it is cheaper. My questions are:
1. If I will move out of Canada permanently - will I have to close all my bank accounts. 
2. If I will move out of Canada permanently - will I have to "cash" RRSP and pay tax on full RRSP amount?
3. If I have a business corporation in Canada and I am planning to have some money in corporation and in my retirement years I'll be taking out dividends out of my corporation - can I do that, or when moving out of Canada I must close my business?

I would also appreciate any advice you can give how to better plan finances if I will do early retirement (at about 55) in another country.


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## uptoolate (Oct 9, 2011)

By way of clarification, you are planning to become a 'non-resident' of Canada? Is that correct?


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## vimmm (Feb 27, 2011)

uptoolate said:


> By way of clarification, you are planning to become a 'non-resident' of Canada? Is that correct?


To be honest I don't know if I want to become "non-resident" or no. I want to see what other people do when they retire.
My understanding if I will live outside of Ontario for more than 6 months, I will loose OHIP (health benefit) anyway. So there is really no reason for me to stay as canadian resident, because my understanding is that if I am still canadian resident - I have to pay taxes. But at the same time, I want to keep my bank accounts and my business in Canada - just because I feel that banking system here is safer. So I would like not to pay Canadian taxes, but to still get Canadian pension and have bank account in Canada. I understand that most likely if I am not paying canadian taxes, I cannot have business in Canada.

So how other retiries do in such case? Do they live in other country but still pay canadian taxes? But then your taxes don't cover any benefits - like OHIP.


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## vimmm (Feb 27, 2011)

Let me explain just a bit more why I am having this question.

I belive I know how to prepare my finances if I will be doing early retirement and I will be staying in Canada or be going south just for 5-6 months a year. I will have some money in my business that I will take out as dividends, then I will take some money out of RRSP - and pay taxes on it. And at 65 I'll start getting back a bit money from CPP.

But lately I read a lot of articles about people retiring in Equador or Mexico and living on much less money than in Canada. So I am considering exploring this option. But when I started to think more about this, it hit me that for this I might have to change on how I prepare my finances for retirement. For example, if I have to become canadian non resident and I have to cash out RRSP, then there is no point putting money into my RRSP account. Or if I have to close my business and take all the money out of it, then there is no point keeping money in business.

So I am feeling that I have not considered at all this option and it could be that if I'll choose to retire permanently in another country then my current financial planning is bad. The more I think about this, the more I believe that option retiring permanently somewhere else is not a bad idea - for one, I dont have a single relative here in Canada, except my wife and kids. 

So really I want to know if people who retire to other countries close all bank accounts here and if so, do they pay all taxes at the time of closure?

I already read this document that has many explanations:
http://www.voyage.gc.ca/publications/retirement_retraite-eng

But I would also like to get input from people and their suggestions, tips.


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## Square Root (Jan 30, 2010)

You question is a complicated one. Generally speaking when you cease to be a resident of Canada there will be a "settling up" of your taxes. You will have a deemed disposition of your capital property and tax deferred accounts (RSP etc) and any tax owing will need to be paid. There would be many other tax issues and getting expert advice would be an absolute necessity.


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## canadianbanks (Jun 5, 2009)

Why don't you talk to an accountant about the questions you have? Depending on how complex your situation is you might be needing a tax lawyers as well.


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## OhGreatGuru (May 24, 2009)

CDN Banks is right - get professional advice. This is complicated. Becoming a non-resident for tax purposes is more complicated than just being out of the country for more than half the year. CRA has some guidelines on non-resident rules. Maintaining "residential ties" such as a Cdn business, bank accounts, and investments may disqualify you from being considered a non-resident for tax purposes.

I believe you can keep your RRSP (ie. it doesn't have to be collapsed), but withdrawals will be taxed at ~25%. Likewise you pay 25% tax on CPP & OAS, so you never entirely escape the CDN tax man.


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## OhGreatGuru (May 24, 2009)

Alternatively:
- Liquidate all your CDN assets;
- Pay the resulting tax bill
- Leave with all your remaining money
- Renounce your CDN citizenship so we don't have any obligation to rescue you when revolution or natural disaster hits your new home.


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## Daniel A. (Mar 20, 2011)

There are ways to transfer your assets to another country and be taxed at their level.
It's a matter of knowing which countries have treaties with Canada.
Ireland is one they tax at 15% on assets.


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## fraser (May 15, 2010)

Understand the historical currency exchange and time you asset movement to yield positive results. 

As an example, now may be a good time to move money to GBP or Euro based investments as the exchange is low. You get a lot more GBP's to the dollar when the exchange rate is 1.60 ish vs when it was 2.25 not so very long ago.

Timing is everything. Get expert advice/guidance from a tax expert. We looked at this last year and decided that if we did move forward it would be imperative to get direction given our personal tax situation.


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## OhGreatGuru (May 24, 2009)

Start reading here:
http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/lvng-eng.html
here:
http://www.servicecanada.gc.ca/eng/subjects/travel/abroad.shtml
and here:
http://www.voyage.gc.ca/publications/retirement_retraite-eng

Then go to Chapters and your public library and look up "Retiring Abroad".


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## vimmm (Feb 27, 2011)

Thank you everybody for links and tips.

It is way to early for me to talk to accountants or lawyers, as my retirement is at least 10 years away. 
But I tried to find much more info on the internet about this and it is not easy. But after reading all this stuff I believe that majority of retiries who do that in other countries still stay as canadian residents for tax purposes. 
I tried to do some math and it appears that staying resident and paying canadian taxes makes more sense, than cashing out RRSPs and other gains in the same year and paying taxes on that at once. In my calcs I assumed that another country will not tax me on my canadian pension/investment income as I belive that is the case for many popular retirement countries.

So in such case it appears that my retirement plan that includes business account and RRSPs is in good shape.


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## OhGreatGuru (May 24, 2009)

vimmm said:


> ... In my calcs I assumed that another country will not tax me on my canadian pension/investment income as I belive that is the case for many popular retirement countries.


You need to look into that more carefully. It would only apply to certain pension plans for which there are tax treaties between Canada and the other country. I believe most of these treaties only cover public pensions such as CPP and OAS.


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## Daniel A. (Mar 20, 2011)

You could also look at Offshore Investment accounts there is good information in those publications.


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