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I always try to remind people that how you approach cross-border tax is unique to your circumstances. Sometimes, it’s just easier to get detailed information from a cross-border CPA and Chartered Accountant who can answer ALL of your questions. If that’s you, let’s schedule a call to get you some help.
What's the difference between a 401K and a Canadian RRSP?
We recently moved to United States from Canada due to work and my U.S. employer is offering a 401(k) plan. I have a Canadian RRSP that I contributed to but I have no idea how 401(k) plan can help me? What is the difference between 401(k) and RRSP?
Both the 401k and the Canadian RRSP provide monetary savings for retirement.
Similarities:
- Both are to invest and increase a retirement account
- Both are tax-deferred
- Both have annual contribution limits
- Both provide access to a combination of investments
Differences:
- An RRSP account doesn’t penalize an account holder for early withdrawals for Canadian tax purposes, but in the US you could be taxed 10% for an early withdrawal on top of regular income tax
- Unused RRSP contribution limits can carry over to next year, but a 401k does not allow rollover contributions
You can read more about each plan, contributions, and taxes here: 401k vs. Canadian RRSP
