Hopping to Retire . . . Often

[PauperStrategy]

A employment change in 2004 as I turned 50 resulted in a decline in retirement benefits. This started a journey to understand planning for retirement. Modeling (in EXCEL) the process of accumulating and later withdrawing retirement funds has resulted in a developed strategy I call the Pauper Strategy. This strategy attempts to move retirement savings into either tax deferred (401K and/or IRA) funds or tax paid but deferred funds (Roth 401K and/or Roth IRA) funds at or below some threshhold incremental tax rate. Once one is drawing significant social security, one need to appear as a pauper (have low income) to avoid high incremental taxation. To live well and do this, one needs a very large Roth account.

I am particularly interested in the prospects of multiple retirements and or multiple social security income streams. I have at the age of 55, essentially maxed out the US Social Security System. Thus, to get more I need to participate in an additional system. For example, if I move to Canada and work for the next decade, what do I end up with? Can I live on the border, collect both Social Security payments and use both health care systems? Should I?

Where in the English speaking world is there a system which is nearly as good as the US social security system?

 

[Midpack]

You can collect SS benefits, but I don't believe you have Medicare benefits if you live anywhere outside the USA, FWIW. No idea what the regs are for Canada.

 

[REWahoo]

Hopping to retire:

 

[CuppaJoe]

Hopping to retire:

Welcome PauperStrategy! You should be right at home with pancakes on hopping bunnies.

I'm going to double check my spelling before posting this.

 

[Meadbh]

IFor example, if I move to Canada and work for the next decade, what do I end up with? Can I live on the border, collect both Social Security payments and use both health care systems?

To use Canada's healthcare system you must apply for a health card in the province or territory of your choice. Prerequisites include:
a. you must be legally entitled to live and work in Canada
b. you must live in the said province or territory for at least 6 months each year
c. hence, you will need to file taxes here.

http://www.hc-sc.gc.ca/hcs-sss/medi-assur/index-eng.php

The Canada Pension Plan (which is well funded) provides income supplements for people who have worked in Canada over decades. 10 years would not generate a significant pension.

Canada Pension Plan (CPP)

In other words, you need to contribute your share. That said, what do you do? The economy is beginning to slow but there are still many opportunities for people with the right skills.

 

[Alan]

I am particularly interested in the prospects of multiple retirements and or multiple social security income streams. I have at the age of 55, essentially maxed out the US Social Security System. Thus, to get more I need to participate in an additional system. For example, if I move to Canada and work for the next decade, what do I end up with? Can I live on the border, collect both Social Security payments and use both health care systems? Should I?

Where in the English speaking world is there a system which is nearly as good as the US social security system?

A few years ago while on vacation in England I read an article in the newspaper comparing the British SS payments to the other EU countries to see how they stacked up. They also showed the US as an extenal comparison and the US was a whole factor better than the EU for us (we have about max'ed out the US system). Australia is also well behind the US in SS payments. btw, having worked in Britain for 22 years I am eligible and plan to draw SS from Britain. (DW did not earn enough credits while we lived there).

The big difference is health care, and if things got bad here health-wise our fall back is to move to the UK where we would qualify for healthcare after 6 months residency.

oh, welcome to the forum

 

[PauperStrategy]

If I work 10+ years in Canada, I get something from the Canada Pension system. Perhaps as much as I pay for.

Having already worked 35 years at or above the maximum wage in the US, I get very little additional from Social Security with additional work. I pay and get nothing additional for that money. As far as health care goes, Medicare pays for services performed in the US so one who "straddles the border" could have a Canadian residence and access to both health care systems. However, to import the canadian pension requires a prior 20 year residence in Canada.

Yes, I qualify to immigrate to Canada.

As far as Australia is concerned, they means test their social security system and I would get nothing.

England is also possible.

My point in starting this discussion is that an individual who started working young and has made a good income for his whole career can essentially get nothing for the additional years of paying into the US Social Security System. This reality suggests that after the first retirement, perhaps next year at age 55, location and/or requriement that one pay into the US Social Security System can affect the next job salary comparison by 10% or so.

 

[jimnjana]

Pauper..., Look at the federal govt. If you can get hired, you would qualify for a reduced pension after 5 years (deferred until 62 I think) you get vested in their TSP aka 401k after 3 years.

Jim

 

[Ed_The_Gypsy]

You have to be very careful about this.

I am from the US but I work in Canada as a contractor. My home in the US is essentially on the border. I am essentially doing what you propose, but not on purpose.

As I understand it, I must pay into CPP, but unless I become a Permanent Resident or citizen, I will not be able to take any benefits from CPP. The big plus for me is that by tax treaty, I either pay into CPP or SS, but not both. The payments to CPP are MUCH smaller than my contributions to SS would be (15.2% for an independent contractor, IIRC). Since the marginal benefits of me paying that much to SS are negative at this time (like you, I would never get back out what I pay in), it works out for me.

Also, unless you become a Permanent Resident or citizen, you cannot retire in Canada. I probably should get Permanent Residency as I will be up here for a while.

I joined the Alberta health Plan because it is cheap ($143/quarter today; free next year--how can you beat that?). I am covered as long as I reside in Canada at least half the year. We also have health insurance in the US through my wife's job. I have not looked into how Medicare would work for me if I stayed up here, but I want an option of some kind. Private health insurance seems to be illegal in Canada except for travel outside the country.

Canada will soon have something like a Roth IRA, but better in one way. In the US, you cannot carry over unused contributions to the next year. In Canada, you can. Beware, though. At this time, Canada does not recognize that income in or from a Roth is tax-free, and Canada taxes citizens on world-wide income (as does the US). When they finally get a Roth clone, they may recognize the US Roth vehicle as tax-free. No word yet if the US will recognize the Canadian Roth clone as tax-free.

However, the costs of investing in Canada are much higher than in the US (Vanguard, etc.). I would never have anything more than a savings account in Canada--definitely no investments up here--mostly because it would complicate my life too much. My bank up here (TD Canada Trust) offers a cross-border account but they take 2.5% when converting to $US. Typically, I use my TD Visa to buy big things in the US.

By the way, everything costs more in Canada. Gas is about 20% more in Alberta (even higher in BC, where the local kleptocracy has just instituted a carbon tax). Beer and wine cost more. A bottle of Chilean Cabernet costs me $6 in Bellingham, WA, but $12 in Calgary. Books and CDs cost more, even though the exchange rate is almost at parity these days. Cars also cost more. Taxes are higher, too, but Alberta's are the lowest and probably less than New York State, for example.

I have to pay taxes in both Canada and the US and must file in both countries. I pay a cross-border tax preparer to file in two countries.

Yes, you can live on the border and use both health care systems (IF you have your PR and live on the Canadian side). You can also collect both SS and CPP. I am guessing that it would cost more than it is worth.

I am watching with interest to see what the Canadians on this board have to say.

Cheers,

Ed

 

[Meadbh]

What Ed said.

Except for this statement:

Private health insurance seems to be illegal in Canada except for travel outside the country.

Canadian medicare does not cover all healthcare expenses, e.g. ambulance, vision care, dental care. Private insurance exists to cover these costs and is usually part of a benefits package. Self employed individuals can also purchase private insurance.

 

[Ed_The_Gypsy]

Thanks, Meadbh,

I have to look into that private ins.

Yes, I forgot to mention that Canadian medicare does not cover everything. I consider it to be cheap catastrophic insurance for me.