An IRA is similar to an RRSP in that contributions are tax deductible, the funds grow tax sheltered while invested inside the account, and there is an annual “required minimum distribution” for investors after the age of 70.5 in which funds are required to be withdrawn and are taxable as income.
As advisors, we may be tempted to encourage our clients with IRAs — but who have now moved back to Canada — to move these funds back to this country so that we can manage those funds along with the rest of their Canadian retirement savings, which may consist of RRSPs, TFSAs and non-registered funds.
Although an IRA can be transferred, tax-free, to a Canadian RRSP, it’s complicated and not always worthwhile.