A 2026 plain-English guide to your options, the tax rules, and the one mistake that costs cross-border movers the most.

If you are moving from the United States to Canada, your 401(k) is probably one of your largest assets. The good news is simple. It does not disappear when you cross the border, and in most cases you do not have to touch it at all. The Canada-US tax treaty was built to let your retirement savings keep growing tax-deferred on both sides.

What trips people up is not the move itself. It is a handful of well-meaning decisions made in the wrong order. Cashing out to “start fresh.” Rushing a transfer into an RRSP because it feels tidier. Letting a US brokerage freeze the account because the paperwork looked hard. Each of those can hand 30 percent or more of your savings to a tax bill you never needed to pay.

Here is everything you actually need to know, in the order you need it.

The short answer

You have four real options for a 401(k) when you move to Canada:

• Leave it in the US (often the simplest and best)
• Roll it into an IRA that a cross-border advisor manages from Canada
• Transfer it into an RRSP under Section 60(j), in specific situations only
• Cash it out (almost never the right move)

The one rule that saves the most money: do not withdraw or transfer anything before you understand how the treaty taxes it. A traditional 401(k) that stays invested keeps its tax-deferred status in Canada automatically. The trouble starts the moment money leaves the account.

Does your 401(k) get frozen when you move to Canada?

Sometimes, yes, and this catches people off guard. Your 401(k) itself is safe. But once your address on file is Canadian, many US plan administrators and brokerages restrict the account. You may still be able to hold your investments, but you cannot buy, rebalance, or in some cases even log in to trade. The account is not gone. It is just stuck.

This is a compliance decision on the firm’s side, not a tax law. It is also the single most common reason cross-border movers end up rolling a 401(k) into an IRA. An IRA held with a firm that is registered to work with Canadian residents can be actively managed again. We will come back to that under Option 2.

Is your 401(k) still tax-deferred once you live in Canada?

For a traditional 401(k) or IRA, yes, and you do not have to do anything to make it happen. Article XVIII of the Canada-US tax treaty tells Canada to respect the tax-deferred status of your US retirement plan. The money keeps growing untaxed inside the account. Canada only taxes it when you take money out, the same way the US does.

Roth accounts are different. A Roth 401(k) or Roth IRA can keep its tax-free treatment in Canada, but only if you file a one-time election with the Canada Revenue Agency, and only if you stop contributing once you become a Canadian resident. Miss the election, and Canada can start taxing the growth. Keep contributing after you land, and you can “taint” the account and lose the exemption on that portion. If you hold a Roth, this is the detail to get right before your first Canadian tax return.

The four things you can do with a 401(k) when you move to Canada

Here is how the four options compare at a glance. The rest of this section walks through each one.

Option	Best for	Watch out for	Keeps tax deferral?
Leave it in the US	Most people. Simple, low cost, nothing to unwind.	Some plan administrators freeze accounts for non-US addresses.	Yes
Roll into an IRA (managed from Canada)	Anyone whose 401(k) is frozen or scattered across old employers.	Your IRA must be held by a firm registered to serve Canadian residents.	Yes
Transfer into an RRSP (Section 60(j))	A narrow set of low-income transition years, done with an advisor.	The 30% US withholding and, under 59.5, a 10% penalty that Canada will not refund.	Yes, if done correctly
Cash it out	Almost no one.	Full US tax, 10% penalty under 59.5, and a large Canadian income inclusion.	No

Option 1: Leave it in the US

For most people this is the cleanest choice. Your 401(k) stays where it is, stays tax-deferred under the treaty, and you deal with it in retirement as ordinary income. No transfer, no withholding event, no penalty. The only real risk is the freeze problem above. If your plan administrator restricts the account for a Canadian address, “leaving it alone” can quietly mean “leaving it unmanaged,” which is not the same thing. Confirm you can still manage the account from Canada before you decide to do nothing.

Option 2: Roll it into an IRA managed from Canada

This is the option that solves the freeze. You roll your 401(k) into a rollover IRA, held with a firm that is registered to serve Canadian residents, and a dual-registered advisor manages it from Canada. Done as a direct rollover, this is not a taxable event and there is no withholding. It keeps every dollar tax-deferred, and it lets you consolidate old 401(k)s and 403(b)s from past employers into one account you can actually see and control. For anyone with a frozen plan or a trail of accounts from job changes, this is usually the move.

Option 3: Transfer it into an RRSP under Section 60(j)

This is the one that sounds appealing and backfires most often. Canadian tax law does allow you to move a US retirement plan into an RRSP using paragraph 60(j) of the Income Tax Act. It does not use up your regular RRSP contribution room, which is why people like it. But the mechanics are unforgiving, and we have given it its own section below because the trap is worth understanding in full.

Option 4: Cash it out

Almost never the right answer. If you withdraw the full balance, the US taxes it, you likely lose 30 percent to withholding up front, and if you are under 59 and a half you add a 10 percent early-withdrawal penalty on top. Then Canada includes the withdrawal in your income too. You get a foreign tax credit for the US tax, but not for the penalty. The result is a smaller nest egg and a tax bill you engineered yourself. The only common exception is a small, stranded account where the paperwork genuinely costs more than the balance is worth.

How your 401(k) is taxed once you are a Canadian resident

This is where the treaty does its real work. Three numbers matter.

• 15 percent on periodic payments. If you set up regular, scheduled withdrawals in retirement, the treaty caps US withholding at 15 percent. “Periodic” generally means payments at set intervals over more than a year, not a one-time grab.
• 30 percent on lump sums. Take it all at once and the US default is 30 percent withholding. Plan administrators default to 30 percent to protect themselves, so assume the higher rate on any lump-sum withdrawal even if you think you qualify for less.
• 10 percent penalty before age 59 and a half. The US early-withdrawal penalty still applies to Canadian residents, and Canada will not give you a credit for it. It is a pure loss.

On the Canadian side, you report the full withdrawal as income, then claim a foreign tax credit for the US tax you paid. The practical result: you pay the higher of the two countries’ rates, not both stacked on top of each other. The treaty stops the double tax. It does not make the money tax-free.

Required minimum distributions still apply. The US makes you start drawing down a traditional 401(k) or IRA at age 73 if you were born between 1951 and 1959, and age 75 if you were born in 1960 or later. Living in Canada does not change that schedule, so it needs to be part of your retirement income plan, not a surprise at 73.

Is there a 401(k) in Canada? The RRSP equivalent, explained

Canada does not have a 401(k), but it has close cousins. The Registered Retirement Savings Plan, or RRSP, is the main one. Like a 401(k), you contribute pre-tax income, it grows tax-deferred, and you pay tax when you withdraw. If your Canadian employer offers a Group RRSP with matching contributions, that is the closest structural match to a US 401(k), right down to the employer match.

The Roth 401(k) has a Canadian cousin too: the Tax-Free Savings Account, or TFSA, where you contribute after-tax money and withdraw tax-free. One important warning if you are a US citizen or green card holder living in Canada: the IRS does not recognize the TFSA as tax-free, and holding certain Canadian funds inside one can trigger punitive PFIC treatment. If you are a US person, treat the TFSA with caution and get advice before you open one.

The RRSP transfer trap: why Section 60(j) backfires

On paper, moving your 401(k) into an RRSP looks elegant. One retirement account, in the country you now live in, in your own currency. Here is why it so often costs more than it saves.

A 60(j) transfer is not a direct rollover. You have to withdraw the 401(k) as a lump sum first. That triggers the 30 percent US withholding immediately. You then contribute the amount to your RRSP and claim a special 60(j) deduction that offsets the Canadian income inclusion. The catch is that you only receive 70 percent of your money after withholding, but to fully offset the Canadian tax you need to contribute the whole 100 percent. That means finding the missing 30 percent from other savings to top up the RRSP, then waiting to recover the withholding through a foreign tax credit.

A worked example. Say you transfer a US$100,000 401(k) into an RRSP.

• The US withholds US$30,000. You receive US$70,000.
• To fully shelter the transfer, you contribute the full US$100,000 to your RRSP, topping up the US$30,000 gap from other cash.
• You claim a foreign tax credit for the US$30,000, but if your Canadian tax on the inclusion is smaller than the credit, you cannot always use it all in one year.
• If you are under 59 and a half, add a US$10,000 penalty that Canada will never refund. That is money gone for good.

For a narrow group, usually someone in a very low income year, with cash on hand to cover the withholding, over 59 and a half, and working with a cross-border accountant, a 60(j) transfer can make sense. For everyone else, leaving the money in an IRA achieves the same goal, keeping the savings tax-deferred in Canada, without the withholding drag or the penalty risk. One more limit worth knowing: Roth IRAs cannot be moved this way at all.

What about a Roth 401(k) or Roth IRA?

Roth accounts get their own set of rules. Because you already paid US tax on the contributions, the account grows and pays out tax-free in the US. To keep that treatment in Canada, you file a one-time treaty election with the CRA that tells Canada to leave the Roth alone. Two things can break it. First, forgetting to file the election, which lets Canada tax the growth. Second, contributing to the Roth after you become a Canadian resident, which taints the account and can strip the exemption from everything you add after that point. If you own a Roth, stop contributing once you land, and file the election with your first Canadian return.

Three cross-border traps to watch if you are a US person in Canada

If you are a US citizen or green card holder, moving to Canada does not end your US filing obligations. Three items catch people most often, and each deserves its own conversation with a cross-border advisor:

• PFICs. Most Canadian mutual funds and ETFs are treated by the IRS as Passive Foreign Investment Companies, which carry punishing tax and reporting rules. This is why a US person’s Canadian portfolio has to be built carefully.
• The TFSA. Tax-free in Canada, not tax-free to the IRS, and a common PFIC trap. Often not worth it for US persons.
• FBAR and FATCA. Once your Canadian accounts cross US$10,000 combined, you file an FBAR every year. Larger balances add Form 8938. These are reporting forms, not extra taxes, but the penalties for missing them are steep.

CPP, OAS and US Social Security

If you worked in both countries, you may collect from both systems. The Canada-US totalization agreement lets you combine your work credits so you are not shut out of either benefit for falling short in one country. Canada also has Old Age Security, based on years lived in Canada after age 18, on top of the Canada Pension Plan.

There is good news for anyone who earned a Canadian pension and US Social Security. The Windfall Elimination Provision and Government Pension Offset, which used to claw back US Social Security for people with foreign pensions, were repealed by the Social Security Fairness Act in early 2025. Many cross-border retirees are now owed larger US benefits than before. Under the treaty, US Social Security received by a Canadian resident is taxed only in Canada, and 15 percent of it is exempt, so only 85 percent is included in your Canadian income.

Your pre-move 401(k) checklist

Timing matters more than almost anything else here. The best moves are cheaper before you land than after.

• 12 months out: Map every US retirement account you hold. Confirm which plan administrators will and will not keep your account open with a Canadian address.
• 6 months out: Decide, with a dual-registered advisor, whether you are leaving the 401(k), rolling it to an IRA, or in a rare case using 60(j). Line up an IRA custodian that serves Canadian residents.
• 3 months out: Complete any direct rollover while you are still a US resident, when it is simplest. File nothing that triggers withholding without a plan for the credit.
• First year in Canada: File your Roth treaty election if you hold a Roth. Set up your FBAR and FATCA reporting. Build a withdrawal plan that respects both the 15 percent periodic rate and your future RMDs.

Common questions

Can I keep contributing to my 401(k) after I move to Canada?

Usually no. Once you leave your US employer you can no longer contribute, and once you are a Canadian resident without US earned income there is generally nothing to contribute from. Your Canadian RRSP becomes the place you build new retirement savings.

Can I keep my US brokerage account after moving to Canada?

Sometimes. It depends entirely on the firm. Some keep cross-border clients, many do not and will restrict or close the account for a Canadian address. Confirm before you move, and have an IRA custodian that serves Canadian residents lined up as a backup.

Are IRA and 401(k) distributions taxable in Canada?

Yes. As a Canadian resident you report the full distribution as income in Canada, and you claim a foreign tax credit for the US tax withheld. You end up paying the higher of the two countries’ rates, not both.

At what age can I withdraw without a penalty?

Age 59 and a half. Withdraw before that and the US adds a 10 percent penalty that Canada will not credit back to you. Required minimum distributions then begin at 73 or 75 depending on your birth year.

What is Form RC268, and do I need it?

RC268 is a Canadian form for cross-border commuters who live in Canada but contribute to a US employer plan while working in the US. If you have permanently relocated and stopped contributing, it does not apply to you. It is a common point of confusion, which is why it is worth naming.

Should I just cash out and start over in Canada?

Almost never. Cashing out stacks US tax, a possible 10 percent penalty, and a Canadian income inclusion, and it permanently ends the tax-deferred growth. In nearly every case, leaving the money invested in the US or an IRA leaves you far better off.

The bottom line

Your 401(k) is portable, and the treaty is on your side. For most people moving to Canada, the right answer is quiet: leave the money invested, or roll it into an IRA you can manage from Canada, and keep it tax-deferred. The expensive mistakes almost always come from moving too fast, cashing out, or forcing a transfer into an RRSP without running the numbers first.

The reason cross-border planning exists is that the rules are written in two tax codes at once, and the order you do things in changes the tax bill. Getting the sequence right, before you cross the border, is where the money is saved.

Planning a Canada-US move with a 401(k) or IRA?

Sartorial Wealth is a dual-registered, cross-border wealth manager. We help Canadians and Americans move retirement savings across the border without paying tax they do not owe. Book a call to map your 401(k) options before you make a move: Book a call

This article is for informational purposes only and is not tax, legal, or investment advice. Cross-border tax rules change and depend on your personal situation. Consult a dual-registered cross-border advisor and a cross-border accountant before acting. Figures reflect 2026 rules current as of publication.