If you are a U.S. citizen who is retiring, you may be wondering if Canada is a good place to spend your golden years. There are many factors to consider when deciding to move north of the border for retirement. The cost of living, climate, lifestyle, and healthcare options are only a few. You should also contemplate where it is more advantageous for you to reside in order to start searching for Vancouver or Toronto real estate. This guide will discuss some of the pros and cons of retiring in Canada from the United States. Read on to learn more.
Why Retire To Canada From The U.S.?
Retiring to Canada might not be the evident choice for many Americans, but certain aspects of living in Canada make it a desirable location for seniors. Here are some of the reasons why our northern neighbor can be a perfect retirement spot:
- Canada is the sixth safest country in the world according to the Global Peace Index for 2022, with outstanding scores in crime levels, internal conflicts, and political stability.
- The national government funds Canada’s healthcare, and therefore, it’s universal and costs significantly less than U.S. healthcare.
- Since much of the country is uninhabited, Canada is an outdoors paradise. The Canadian way of life is defined, in part, by its emphasis on physical activity and exposure to nature.
- Canada is close enough to the U.S., so you can have an exciting change of scenery and still stay close to friends, family, and the things you enjoy.
- Canada is an accessible country regularly serviced by direct flight from major air terminals across the globe. U.S. citizens can also cross the border easily at any time to visit your loved ones.
- Canadians have an extended reputation for politeness, tolerance, and friendliness.
Immigration Basics For Retiring To Canada From U.S.
Immigrating to Canada for retirement is not as straightforward as many people may think for U.S. citizens. This is mainly due to the fact that there is no such thing as a formal retirement visa program in Canada. However, there are still paths to permanent residency and a couple of other non-permanent alternatives you can explore in order to make your dream of retiring in Canada a reality. Let’s dig deeper into the matter:
The Permanent Option: Canadian Residency
The United States is a visa-exempt country for Canada which means U.S. citizens are allowed to enter and stay in Canada for up to six months at the discretion of the Canadian Border Services Agency.
For those in need of more time, there’s the Temporary Residency Permit (TRP), but neither of these options is suitable for retirement. The most obvious alternative for retirees looking to move to Canada permanently is one of its official immigration programs:
Having a close family member that’s a Canadian citizen, permanent resident, or is registered under the Canadian Indian Act is the best way for a retiree to obtain permanent residence in Canada. The sponsored person can be a spouse, common-law or conjugal partner, parent, or grandparent. This alternative is the best one for senior U.S. citizens because it doesn’t involve work. The process is also reasonably expedited because the Canadian government prioritises Family Sponsorship in an effort to keep families together. In fact, the program has been one of the least affected by the pandemic travel restrictions.
The easiest way to immigrate to Canada is the Express Entry. Still, it can be challenging for retirees to qualify because it involves work, and they consider age when inviting new skilled workers to the country. However, you can avoid your age impacting your eligibility if you plan on moving to Canada a few years before the retirement age.
Express Entry, a web-based system that handles skilled workers’ applications to move to Canada, it’s the most popular way to obtain Permanent Residence. In 2021, 91,150 people gained P.R. through this pathway. The system has three different programs, each with different requirements and subject to a point-based system called Comprehensive Ranking System (CRS). Only candidates with the highest CRS scores receive an invitation to apply.
Investment & Entrepreneurship
There are a few business immigration options in Canada for foreign entrepreneurs and investors. The two main ones are the Start-Up Visa Program and the Provincial Nominee Programs (PNPs). In order to move to Canada under one of these programs, applicants must meet several requirements. They should also be innovative and open a business or create jobs in the country.
The Part-Time Route
If the permanent options didn’t feel right for your personal circumstances, there’s an immigration alternative for part-time retirement that can be the answer:
Parent and Grandparent Super Visa
The Parent and Grandparent Super Visa is a 10-year multi-entry visa that allows parents and grandparents of Canadian citizens or permanent residents to spend up to two consecutive years with them in the country. To have Canadian medical insurance and an invitation letter from your child or grandchild are part of the requirements to apply. You should apply for a super visa from outside Canada.
Canadian Healthcare System
One of the most significant distinctions between living in Canada as a visitor and settling permanently is your right to healthcare, critical for retirement living. Although both the U.S and Canadian healthcare systems have their pros and cons, the Canadian medical management is often considered more beneficial for retirees.
Canada provides citizens and residents with universal, tax-based healthcare coverage, which makes it easier for retirees to receive the comprehensive care they require at a more affordable cost. On the other hand, in the United States, healthcare is generally more expensive, and it can be difficult to find good coverage if you are retired.
Another difference between the Canadian healthcare system and the U.S. healthcare system is the waiting time. In Canada, all patients need a referral from a General Practitioner to see a specialist, so the waiting times for certain appointments tend to be longer there than in the U.S. Though Canadians can receive emergency care immediately if they need it.
Canada’s socialised system often results in lower costs for medical procedures and prescription drugs. Still, Canadians purchase private health insurance for treatments not covered by government insurance, like dentistry and cosmetic treatments. There are also some minor variations in coverage among Canadian provinces, which are comparable to U.S. states.
Depending on their location, Americans are used to some snow in the winter, but this season is serious business in Canada. Canadian winters are pretty harsh and long, with average daily temperatures near 5°F that can drop below −40°F. However, they may vary depending on where you are living. On the other hand, Summertime will seem like a dream come true with average highs between 77 and 86°F.
The Vancouver area in British Columbia experiences the mildest winter season in Canada, with only a few light snowfalls every year. A win-win situation can be becoming a Canadian snowbird spending your summers in Canada and travelling south of the border for warmer winter months.
Living Costs In Canada
A typical guideline is to budget for 70 percent of your pre-retirement earnings each year in retirement. Here are a few considerations on living costs in Canada:
Housing is one of the biggest items in any budget, and that’s not an exception in Canada. You can expect to dedicate between 35% and 50% of your expenses to housing. For example, the average rent for a one-bedroom apartment in Toronto, ON is $1,900, but those prices drop significantly if you decide to live in the city’s outskirts or if you choose a less expensive city, like Montreal or Calgary. Canada also has several seniors’ housing costs and programs for its elderly citizens with low income. The programs vary by province and territory.
If you are looking to purchase real estate in Canada, know that prices are currently soaring, especially in the major cities. The national median price of a single-family detached home is currently $790,000. However, if you’re seeking a peaceful retirement in a rural location or cottage country, there are plenty of choices that are far more reasonable.
Canada’s living expenses will vary depending on the location, so they can seem to you higher or lower depending on where you reside in the United States and where you are planning to live in Canada. The country manages to strike an excellent balance between quality of life and cost of living; that’s why it is continually ranking among the top 10 countries in the world to live in by the Human Development Report, sponsored by the United Nations Development Program.
Taxation In Canada
Americans who are considered ordinary residents in Canada will be required to pay Canadian taxes and file taxes in the U.S. If you make more than $10,000 a year in the United States, you must complete a 1040 tax form with the IRS. To be considered an ordinary resident for tax purposes, Canada should be where you regularly live, lease or own a home, and have a dependent.
Both Canada and the United States have agreements to prevent fiscal evasion and double taxation. One of them is the Foreign Earned Income Exclusion (FEIE). The FEIE allows single individuals to exempt the first $108,700 earned from U.S. income tax by proving that they live in Canada for at least 330 days each year.
Retirement Accounts And Pension Plans
U.S. citizens and residents may already be making contributions to one or more retirement accounts in the United States, like the Traditional Individual Retirement Arrangement (IRA), a Roth IRA, a 401(k), a 403(b), and a 457(b). Frequently, Americans moving to Canada want to know if they should keep their retirement accounts after their relocation. The answer depends on the specifics of each situation.
In the United States, IRAs, 401(k), 403(b), and 457(b) accounts all enjoy tax deferral status, and Americans relocating to Canada for retirement may continue to defer taxes from those accounts as long as they make the correct selection with the CRA. The easiest way to deal with your retirement accounts after the relocation is to keep them open.
However, when funds are taken out in the future, they will be subject to greater Canadian tax rates since both the CRA and IRS will charge taxes on this money. You may want to convert your IRA, 401(k), 403(b) and 457(b) accounts to Roth IRAs before moving to Canada if you don’t want to pay Canadian tax rates on them as a retiree.
Another option is to convert your retirement accounts into a Registered Retirement Savings Plan (“RRSP”), a tax-deferred savings account for Canadians. Although, this option is not the best one for Americans who wish to maintain their U.S residency status.
Americans who move to Canada worry about whether they will be able to receive their US Social Security payments and how much tax the CRA will take. Under the Canada-U.S. Treaty,
US Social Security Credits are only taxed at 85% by the CRA and the IRS does not tax Canadian residents’ Social Security benefits.
U.S. citizens who move to Canada before the retirement age and are willing to keep working on their professions might be eligible for CPP benefits once they retire because CPP contributions are required in Canada. Those Canadian residents who have spent at least 20 years living in Canada as adults are also eligible for Old Age Security (“OAS”) payments. These benefits, however, can be subject to some limitations.
Best Places To Retire In Canada
If you search a city you’ll find a bunch of comparison charts, like Vancouver vs Toronto, but you can hardly compare one side of the country to the other. However, here are 5 popular choices for retirees in Canada.
Canmore is a small mountain town in the Canadian Rockies located roughly 80 kilometres (50 miles) west of Calgary on the eastern border of Banff National Park. With high-quality healthcare facilities, low crime rates, and excellent resources and activities for seniors, Canmore offers a great combination of adventure and comfort for those seeking a retirement spot in Canada. Farmers markets, social and service clubs, local shops and dining establishments, and a tight-knit community are just a few of the perks of moving to Canmore.
Listed in MoneySense Magazine as one of Canada’s best places to retire, Victoria is home to over 386,000 people in British Columbia. There are 3.73 doctors per 1,000 people in Victoria, as well as plenty of outdoor and indoor activities, volunteering opportunities, several programs specifically designed for retirees, and a growing senior community living its best life. It is hard to tell which one of Victoria’s attributes makes it the fantastic retirement location this city turned out to be. Maybe it has something to do with its seaside charm and reasonably priced housing options, but the pleasant temperate climate and low average property tax are also part of it.
Ontario has the best healthcare system in Canada, and the Niagara region has amazing benefits for retirees, so moving to Niagara-on-the-Lake is getting the best of both worlds! Surrounded by world class wineries, lush hiking trails, and affordable housing alternatives, this community is the second with the highest volume of seniors in the Province. Niagara has a booming cultural scene, expansive parks, a horticultural society, several community centres with resources for the elderly, and activities such as golf clubs, tennis courts, outdoor pools, ice rinks, and more.
Kingston, Ontario, is a dynamic community with a flourishing art and cultural scene, outstanding dining options and entertainment choices that are affordable and charming. Beautifully situated on the shores of Lake Ontario and home to a picturesque waterfront downtown, the city provides an abundance of alternatives to enjoy the great outdoors, as well as comprehensive healthcare, and pretty economic housing options. Kingston has been among MoneySense Magazine’s top places to retire in Canada for several years now.
Relaxing and livable, Halifax has a desirable maritime climate, gorgeous natural areas, quaint small towns, and some stunning beaches and parks for a calm afternoon stroll. Frequently listed among the best places in Canada to invest, the city has several properties for sale and rent in quiet neighborhoods threaded with walking trails. Locals enjoy various activities and festivals for free or low-cost and have access to relatable healthcare services.