What Happens to My RRSP When I Move to the US? Keep It Growing, or Collapse It at 25% — the Real Comparison

The RRSP is exempt from the departure tax and recognized by the treaty, which makes it the rare asset a Canadian can take to the US without an exit event. What changes is the tax architecture around it. Canada's claim converts from resident taxation to Part XIII withholding: lump-sum RRSP withdrawals by a US resident face 25% Canadian withholding, which is a final tax; periodic pension payments — which RRIF withdrawals within limits qualify as — face 15% under the treaty. The US side recognizes the plan as a pension: deferral on the internal growth continues (no annual US tax while the money stays in), and distributions are taxable in the US when received — but not on every dollar. A US resident generally has basis in the plan equal to its value when they became a US resident (for a Canadian who was never US-taxable while contributing), so the US taxes the post-arrival growth portion of distributions, with the Canadian withholding available as a foreign tax credit against the US tax on the same income. Those mechanics create the real decision: collapse early at 25% flat with modest US tax on little growth, draw periodically at 15% with US tax on the growth slice, or leave it compounding for decades — each path priced against your state (Florida and Texas at zero change the answer versus California), your bracket trajectory, and what the money is for.

Key takeaways

• Nothing is forced at the border: no deemed disposition, no required collapse, no Canadian exit charge on the RRSP. Contribution room stops being useful (no Canadian earned income) but the plan stands.
• Custodian check first: many Canadian brokerages restrict or freeze RRSP trading for US-resident clients; US securities regulators permit Canadian retirement accounts to be serviced, but firms choose their own policies — confirm yours will actively manage a US-resident RRSP or move it to one that will before leaving.
• Withholding rates: 25% on lump sums and over-limit withdrawals; 15% on periodic RRIF payments within the greater of twice the annual minimum and 10% of the year-opening value — the definition that makes 'convert to RRIF and draw within the band' the standard efficient pattern.
• US taxation: distributions are US-taxable to the extent they exceed the plan's value at US-residency start (the basis rule for someone who contributed as a non-US person); Canadian withholding credits against the US tax on the distribution. State tax applies per the state's rules — several states do not follow the treaty or the deferral, another line in the where-to-live math.
• Reporting: FBAR and Form 8938 carry the RRSP/RRIF annually; the old Form 8891 is gone and the deferral is automatic under current IRS procedure — no election filing required to keep US deferral.
• Collapsing before the move is almost always worse than after (full inclusion at Canadian resident rates — often 45-53% — versus 25% flat as a non-resident), and collapsing at all competes with decades of continued deferral; the flat 25% is attractive mainly for modest balances, low-growth expectations, or a desire for zero Canadian financial footprint.

The three paths, priced

Leave it: continued two-country deferral, one FBAR line, and the largest eventual balance — the default for anyone under 60 who doesn't need the money. Convert and draw at 15%: for retirees, the RRIF band produces Canada's lowest rate on this money, the US taxes the growth slice with a credit, and states without income tax make the all-in cost roughly the 15%. Collapse at 25%: clean, final, and correct for small plans where the compliance tail outweighs the deferral, or where the US state and bracket picture makes future draws expensive anyway. The wrong path is the panicked pre-move collapse at Canadian top rates — the one choice with no fact pattern that favors it.

Worked example

A 42-year-old moves from Vancouver to Austin with a C$450,000 RRSP. Path chosen: transfer to a Canadian custodian that services US residents, leave it invested, file the FBAR/8938 lines annually — no tax in either country for 23 years. At 65, RRSP-to-RRIF conversion; the plan is C$1.1 million; she draws C$60,000 a year, inside the periodic band: Canada withholds 15% (C$9,000, final); the US taxes the distribution less her pro-rated basis (plan value at arrival, C$450,000, recovered ratably) with the C$9,000 credited — and Texas adds nothing. Effective all-in rate on the draws: roughly the mid-teens. The alternative she priced at 42 — collapsing before departure — would have added the C$450,000 to her final BC resident return at rates near 50%; collapsing just after would have cost a flat 25% plus the loss of two decades of deferral. Keeping it was worth, in her projection, several hundred thousand dollars — for the price of two extra lines on a US information return.

Official sources

"Pensions may also be taxed in the Contracting State in which they arise and according to the laws of that State; but if a resident of the other Contracting State is the beneficial owner of a periodic pension payment, the tax so charged shall not exceed 15 per cent of the gross amount of such payment." — Canada-United States Tax Convention, Article XVIII(2)(a), https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/united-states-america-convention-consolidated-1980-1983-1984-1995-1997.html

The CRA explains that Canadian payers must withhold Part XIII tax at 25% on certain amounts paid or credited to non-residents of Canada — including pensions, RRSP and RRIF payments, and dividends — and that tax treaties may reduce the rate; the Part XIII tax withheld is generally the non-resident's final Canadian tax obligation on that income. — Canada Revenue Agency, Part XIII tax on income from Canada paid to non-residents, https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/payments-non-residents/nr4-part-xiii-tax/part-xiii-withholding-tax.html

Practitioner note

The RRSP is the account clients most often think they must liquidate and least often should: the treaty preserved the deferral, the RRIF band delivers 15%, and the only urgent task is custodial — get the plan somewhere that will manage it for a US address before the old firm freezes it. The collapse question we actually run numbers on is the small plan, where 25% flat and a shorter FBAR beat decades of paperwork.

See also: For your TFSA after moving to the US, see your TFSA after moving to the US; and browse every cross-border tax topic guide, organized by situation.

Next step

Fairlight prepares the RRSP strategy for the move — custodian transition, keep/RRIF/collapse modeling with state tax included, the US basis computation, and the annual reporting setup. See cross-border pricing or book a call.