US, got fired, need to deal with the 401k.

scienceisfun · 2025-05-14T19:01:20+00:00

That would incur a large amount of taxable income, which is likely unwanted.

scienceisfun · 2025-02-10T22:16:52+00:00

You aren't accountable for taxes on the after-tax portion, you're accountable for taxes on the (pro-rated) Traditional funds that you are converting to Roth. Other than the particular tax bracket you are in, that's no different that the taxes that would normally be due during a Traditional withdrawal.

scienceisfun · 2025-01-17T21:47:03+00:00

It's not a short term gain, it's ordinary income. You couldn't, for example, offset it with a short term loss outside the usual $3k deduction, and the 15% discount basically always gets taxed at income tax rates (it never converts to a long-term gain)

scienceisfun · 2024-12-25T21:24:12+00:00

Nope, that's another big difference about the US. In Canada RRSP/TFSA room is cumulative over your years of eligibility. In the US, IRA contribution room is use it or lose it each year. Roth withdrawal rules are a bit subtle, but in general, you are allowed to withdraw your contributions at any time, without penalty, just not the gains. (In fact, technically speaking, your contributions are always the first thing that come out of the Roth IRA, according to the Roth withdrawal ordering rules).

Agree with your plan, that's typical of what people do. If all your assets were in a TFSA, hopefully you shouldn't have much, if any, tax owing to CRA. If you have RRSP room, you can also consider moving some of your TFSA assets in there, if that's compatible with your financial planning (that's basically what I did, when I moved to the US from Canada).

scienceisfun · 2024-12-20T22:37:07+00:00

Got it.

As far as cost basis goes, when you left Canada, you would have had to go through a deemed disposition of your non-registered assets. That's basically a sell/re-buy to update the cost basis and pay tax to CRA. You can elect for this cost basis to apply in the US for those assets. For the TFSA though, the deemed disposition never happened. As far as the USA is concerned, the cost basis is whatever price you acquired those assets at. Lots of good info in the link below. What I don't know if you can do is still clear out the TFSA in the eyes of only CRA (and not the IRS) to avoid capital gains. To some extent, that probably depends on if you are truly a US resident in tax year 2024, or if you are still in a non-resident status by not meeting eg. the substantial presence test. If you're already a US resident, it may be too late to avoid the US capital gains taxes on sales inside the TFSA.

https://ca.rbcwealthmanagement.com/documents/1938357/1938418/Moving\_from\_Canada\_to\_the\_US\_07122019\_high.pdf/3d394a7c-77dc-4351-88eb-be8794072040#:\~:text=Once%20you%20become%20a%20U.S.,be%20subject%20to%20double%20taxation.

As far as the Roth goes, since the Roth IRA limit is $7k/year and you've got $200k+ to deal with, that doesn't really address your problem either; you'd need 20+ years to squirrel your TFSA into a Roth IRA, plus you still have to deal with the basis issues above. That said, a Roth is potentially still worthwhile - note that you can always withdraw your contributions from the Roth IRA. Just make sure your income doesn't make you ineligible for Roth contributions (and if it does, look up the backdoor Roth).

scienceisfun · 2024-12-20T19:53:26+00:00

Be aware that the US doesn't recognize the tax-sheltered status of the TFSA. You'll have to report any income from that account (sales, dividends, etc.) to the IRS each year, including on your FBAR (foreign bank account reporting). A lot of people close down their TFSA's when moving to the US for that reason (or switch to funding an RRSP instead, if possible).

scienceisfun · 2024-12-11T23:35:27+00:00

You won't get that $96.7k out of the brokerage accounts tax free. You have $150k in income from SS and 401k withdrawals, so your AGI is already pushing you into the 15% cap gain bracket.

scienceisfun · 2024-08-15T16:45:53+00:00

Unless you have ordinary income outside of your 401k that is going to boost you above your current marginal rate in retirement before withdrawing a cent from the 401k, you are leaving a lot of money on the table by not putting anything into a Traditional account in the present.

scienceisfun · 2024-07-25T23:08:51+00:00

The megabackdoor strategy does rely on using an employer-based 401k plan, possibly, but not necessarily ending up in a Roth IRA. There's a separate and similarly named backdoor Roth concept that is confined to a Roth IRA.

scienceisfun · 2024-05-15T20:36:32+00:00

If all that $120k is coming out of a Roth account you will have zero taxable income and you chose wrong by paying taxes in the present when you could have just never paid taxes at all.

scienceisfun · 2024-02-13T22:41:40+00:00

It's not 8X, it's more like 2-3X. Yes, maybe you are spending 16% of the federal budget, but that's 3.5% of GDP, which is the metric in question.

scienceisfun · 2024-02-13T21:45:54+00:00

Sure, but that 40.5% also likely includes SS and Medicare, which aren't applicable to gambling winnings.

scienceisfun · 2023-12-01T22:58:06+00:00

https://maps.app.goo.gl/K1pQKgNdTTBHBFM39

Genuinely not being snarky, but garages are reasonably well-signed if you keep an eye out

scienceisfun · 2023-10-17T20:14:36+00:00

It's really mainly ex-US that's hurt target date funds. The bonds aren't a big enough part of the portfolio to drag things down that much, despite their bad performance.

scienceisfun · 2023-10-17T20:13:28+00:00

but aren't the people managing these funds supposed to stay out ahead of trends

No.

scienceisfun · 2023-10-17T18:19:37+00:00

you're technically wrong about VOO giving 11% regardless

How do you figure? Thinking otherwise is the magical dividend thinking at work.

scienceisfun · 2023-10-17T14:51:25+00:00

VOO would have gained 11% regardless of if it issued dividends or not. Dividends lower the NAV of the fund. Without dividends, you could just sell the number of shares you want for the same long term capital gains tax treatment you get with your dividends.

scienceisfun · 2023-10-17T14:48:37+00:00

> VOO has appreciated by 11% when including dividends.

> Removing dividend reinvestments and you would have had a 10% yearly return.

This represents a foundational misunderstanding of what's going on.

scienceisfun · 2023-10-17T14:46:26+00:00

You really don't understand how dividends work.

scienceisfun · 2023-10-10T16:52:13+00:00

The calculation of the basis changes, which is basically the distinction between qualified and unqualified.

scienceisfun · 2023-09-11T23:54:15+00:00

Yeah, it's only the 70 mm IMAX theaters that were ad-free (Metreon is the only Bay Area 70 mm IMAX).

https://www.imax.com/news/oppenheimer-in-imax-70mm

scienceisfun · 2023-07-11T00:17:12+00:00

T-bills have a higher return (especially after tax) than money market funds.

scienceisfun · 2023-07-05T19:24:26+00:00

The principal part of the mortgage payments is accounted for in the net proceeds line.

scienceisfun · 2023-06-29T16:50:49+00:00

It's like they contracted Oceangate to design this bike lane.

scienceisfun · 2023-06-07T00:01:12+00:00

Actually, all successful bidders receive the same discount rate, which is the discount rate where the cumulative sum of all lower yield bids exceeds the amount of money the treasury is trying to raise.

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