Retirement Planning, Wealth Planning

Retirement and the “where” factor

Aug 30, 2021

Have you thought about where you’ll enjoy your retirement? Hundreds of thousands of Canadian retirees believe the best place to spend winter is in the U.S. Sun Belt and other warm destinations. Many purchase vacation properties in Canada where they stay for long stretches throughout the year. Some are quite happy to stay put and others move to be closer to their children and grandchildren. Travelling the world is the dream of many retirees, and then there are those who move abroad permanently.

Your investment objective

At first, planning where you’ll spend retirement is all about a lifestyle choice. But it’s also a key factor in determining your retirement savings goal. A retiree who plans to downsize and move closer to their grandchildren may have very different financial needs than someone who wishes to travel the world. So it’s important to keep us informed, even if you’re just at the idea stage. The “where” factor may affect your investment objective, retirement income needs and the date you plan to retire.

Tax matters if living abroad

If you plan to move permanently to another country or live several months a year abroad, you should consult with a tax expert who can provide specific advice on your situation. Take the example of a Canadian retiree who spends winters in Florida. They may be advised to file the Internal Revenue Service (IRS) form 8840 each year to claim their closer connection to Canada so they’re not classified as a U.S. resident for tax purposes. If this retiree decides to purchase a Florida condo and rents it out a couple of months a year, they must file a U.S. tax return to report rental income – or face penalties and interest charges. Seeking tax advice up front can make all the difference between enjoying your retirement and dealing with unpleasant surprises.