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Am I unique?
Old 07-06-2003, 10:27 AM   #1
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Am I unique?

All:

As in trying to generate new posts here is an interesting situation.

I am an ER, I am 49 my wife is 45 Our net worth (Not cash) is about 1.5m give or take. This does not include personal items like jewelery and art etc, only immediately convertable cash instruments, Including our copiously inflated home in Southern California which is now up for sale. (That is the non cash part, it is paid for though) My wife still works for now to retain health care.

Here is the plan:

When the house is sold, we plan to rent locally for three months or so so my wife can continue working and getting our health care.

I will go to Canada and register as a resident for Socialized health care + pay an extra for better coverage. It takes 3 months to get it. (Now you know why 3 months was used above) My wife and I are both American and Canadian Citizens so this is not an issue.

Why me, because I have a pre-existing condition with high blood pressure and would get charged a lot for supplimental insurance dureing the 3 months I was not covered. While my wife is healthy and can get supplimental insurance for the 3 months waiting period very reasonably.

Then I will return to CA until the 3 months is up and I am covered. My family is in Canada so I can use their place as a residence. After I am covered with health care we will plan a year of visiting our families in Canada who are complaining that we have not spent any significant time together in 25 years and we are all getting older. We will most likely rent a modest home for this period as we do not want to settle in the areas where the family lives.

We will eventually move out west to Vancouver Island or the Lake district interior of BC. and settle there, when a) we are fed up of the family or b) they are fed up of us, which ever comes first.

OK that is the background and current plan, it would be a lot better if interest rates were higher. My personal nemasis.

$350 of our cash is in 401ks, the rest is all after tax cash! Yes I know, but I am into preservation of capital at the moment as I am convinced I am on the borderline of funds for a comfortable retirement on our money for the next 30 - 40 years. No SS yet. Although both of us are fully paid up. Both here in the US and my wife is also fully paid up in Canada. I have to work 3 more years in Canada to be fully paid.

We were planning in converting our 401ks to after taxes using the SEPP 72T withdrawal loophole. Taking minimum out to ensure minimum taxes paid. As as, as far as I have researched taxes are payable on 401ks in the US even if one lives outside. I have still to research this.

This withdrawal would be probably what we live on and hopefully will not need to dip into the other cash for some time.

Eventually we will need $200-300k US for a home.

This all translates to about $2m Canadian at current rates. Interest rates are taxable on the cash money in Canada. Unless I can figure out a way to stash it in Panama or something.

Any comments or even more so experiences would be appreciated.

Ian
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Re: Am I unique?
Old 07-06-2003, 12:55 PM   #2
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Re: Am I unique?

Ian,

It does sound like you have an unusual situation, but many of us probably have our own unusual situations! But I did get lost there on the amount of cash or cash-like vs. the rest of what you have.

Why do you want to convert the 401K out of tax-deferred status? Once you lose the tax-deferred status, you can't get it back. Why not roll the 401K into an IRA, where you will have total control over investment choices? We all have to work within the tax-deferred vs. after-tax mix that we have when we retire. If I had a magic wand, I'd like to wave it over some of my after-tax to get more tax-deferred!

Cash or cash-like... what is its return rate versus, say, a 3 % CPI inflation? Losing, no doubt! I too have some of that situation, don't want to invest it now as a big chunk, yet, long term I know more needs to move from cash into better returns.
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Re: Am I unique?
Old 07-07-2003, 01:19 PM   #3
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Re: Am I unique?

Well, I would opine that we ALL (ERs) have "unusual
situations". Anyway, when I semiretired in 1993, I
assumed that I would have to start drawing down my IRA right away. It's 10 years later and I still have not touched it. This was mostly luck, but still...................
Now, I am within a chip shot of the magic 59 and a half. I'm even starting to think I might hold off a bit longer on dipping into this.
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Re: Am I unique?
Old 07-07-2003, 01:26 PM   #4
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Re: Am I unique?

Some more advice/comments for Ian.

I agree that "changing everything" might be pretty
stressful. I know I could not do it, especially not at my age. Secondly, if my net worth was 1.5 mil, I could
live like a king even with a zero -0- return until my demise and still leave a pile for my kids. It's all relative.
A lot of folks assume I am wealthy. I am, just not in
financial terms.
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Re: Am I unique?
Old 07-23-2003, 06:08 PM   #5
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Re: Am I unique?

For the Americans, most countries only tax you on residence and Canada is no exception to that. The US is one of the few countries in the world that taxes solely on citizenship.

I too am a Canuck in the US (though thankfully not a US citizen - big tax ball and chain). I don't know if you realize it or not but Canada will value your taxable portfolio as of the day that you re-acquire tax residence. That means that you will only owe Canadian taxes on the gains from that day forward. You will, however, still owe US taxes forever.

Your portfolio losers will not be losers for Canadian tax purposes (considered purchased on the day you become a tax resident) so perhaps you should sell them before getting Canadian tax residence - you can re-acquire them later after the US wash sale time frame. Use the losses to offset other US income over the years.

Also, to keep things simple make sure to sell that house before you get Canadian tax residence.

I would recommend heading over to the Grasmick site - www.grasmick.com - and going to the forums. It's mainly a site for Canucks in the US run by a Buffalo immigration lawyer but the tax forum is pretty good on the cross border issues.

Hyperborea

P.S. Maybe I'm "uniquer" than you. :P My spouse is neither American nor Canadian and in retirement (not for about another 8 years) we plan to become tax residence-less while playing perpetual travellers for a number of years.
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Re: Am I unique?
Old 07-27-2003, 04:09 PM   #6
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Re: Am I unique?

And, why would someone want Canadian resident
status??
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Re: Am I unique?
Old 07-27-2003, 04:15 PM   #7
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Re: Am I unique?

Free Healthcare...... In Ontario anyway.
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Re: Am I unique?
Old 07-27-2003, 04:56 PM   #8
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Re: Am I unique?

Okay! Good reason.............................
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Re: Am I unique?
Old 07-28-2003, 09:19 PM   #9
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Re: Am I unique?

It is emergency Heath care, Great if you have a stroke or heart attach. (Experience in my family up there) Otherwise you wait. However for a reasonable $150 - $200 a month you buy a rider that covers all other issues. Not bad really.

Ian
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