Oct 152016
 

 

Be sure to read Part 1 before continuing

What to hold in a frozen investment account:

Remember that in your frozen account there is no rebalancing, no buying, no selling, no withdraw. You can take no action until you return to Canada and unfreeze. Good thing you are read this before you leave Canada and it’s not too late! Your ideal frozen funds should have these characteristics:

  • No dividends
  • No re-balancing required
  • Steady, reliable growth
  • Low fees
  • Allocations: 15% Canadian equity, 40% US equity,  25% International equity, and 20% bonds

If you are under thirty I’d normally suggest 10% in bonds, but since you can’t re-balance it’s best to give your slower growing bonds a head start. In a few years your entire portfolio will be higher(probably), but the bonds will have grown at a slower pace, reducing their share of the total. Ideally that 20% will be closer to 10% or 15% where it belongs. (and yes that will keep shrinking, but there’s really nothing we can do about it if your account is frozen for ten years or longer).

I’ve come up with two options: One single balanced fund, or a set of three or four stable ETFs. Amix of both will also work well:

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Sep 152016
 

So you’ve finally decided it’s too cold here, or you’re sick of Tim Hortons coffee, or some beautiful person has stolen your heart and keeping it hostage in another country. Whatever the circumstance you’re exiting Canada for an unspecified amount of time. But what do you do with your massive swollen nest egg all tucked away in the Toronto Stock Exchange?

Option 1: Don’t Change Anything, Freeze Your Account

If your brokerage allows it you can keep your investment accounts as-is after you leave and potentially avoid:

  • Transaction fees
  • Account closing fees
  • Wire transfer fees
  • Currency conversion fees
  • Realized gains/loses from selling your investments
  • Lost growth during the lag time between selling in Canada and re-investing in your new country

That’s a lot of fees that can be avoided. But they might be pennies compared to the financial disadvantages. Normally if you leave your account it will become FROZEN, meaning you can’t do anything except watch what happens. Some of the implications of a frozen account include:

  • No rebalancing
  • Dividends sit as cash
  • Complex cross-border taxes
  • No access to funds if they’re needed

What about selling everything and closing the account?

Option 2: Liquidate Accounts and Re-invest in Your New Country

Depending on your brokerage, selling might be your only option (Questrade, for example, does not allow non-residents to hold a margin account). Taking your money with you has some benefits:

  • Lower taxes (maybe)
  • Access to better investments
  • Simplified tax reporting
  • Avoidance of jail time and/or $10,000+ fines (your Canadian investments might be considered offshore tax evasion)

Of course the tax benefit won’t matter if Canada is still taxing your worldwide income, and that’s the first thing you need to check:

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