How to Retire in Canada

Many retirees like to head south in search of warmer climates. But what if you want to head north instead? Retiring to Canada has a range of benefits, like universal healthcare and reasonably priced housing. And if you’ve got family and friends in the US, retiring to Canada lets you live the expat life while staying relatively close by. If you’re thinking about retiring in Canada, here’s what you need to know.

If you’re heading to Canada part-time, you can obtain a tourist or family visa. A tourist visa lets you stay in Canada for up to six months of the year. You’ll get a few protections, like the ability to buy a vacation home and set up a bank account – meaning part of your retirement can be spent in Canada. But you’re considered a U.S. resident and you’d still be required to pay U.S. taxes.

Canadian citizens or those with permanent residency can apply for a parent or grandparent under the “super visa” program. This lets you stay in the country for up to two years, but you wouldn’t have access to Canada’s universal healthcare. Along with that, your child or grandchild needs to be a permanent resident or citizen of Canada. They’ll need to write a letter saying they’re financially responsible for you during your stay.

Retirees with family in Canada also can pursue permanent residency under the country’s Parents and Grandparents Program. About 30% of all immigrants coming to Canada are sponsored by family members. Canada also grants permanent residency on humanitarian and compassionate grounds.

You can also apply for permanent residency through the Express Entry system. If accepted, you would have access to government programs and social services, like universal healthcare. It’s the first step to becoming a Canadian citizen. If you have children, university tuition and fees for permanent residents are much less compared to international students.

Canadian rent prices can start as low as $700 CDN (or $525 USD) for a one-bedroom while a three-bedroom starts at $1,100 CDN ($826 USD). But these prices can vary significantly by the city of your choosing, with the cities of Toronto and Vancouver having particularly high costs of living. That variance extends to home prices, too: The average home price in Toronto is $800,900, while in Quebec City, it’s $280,580.

The bottom line: Depending on where you’re moving from and to, your housing costs may be lower or higher than they are now.

Other costs, like food, gas and sales tax are all more expensive in Canada. If you don’t have a permanent residency, you’ll need to get international health insurance, too. So while the favorable exchange rate helps some, you still might be in for an increase cost of living if you’re moving from the US to Canada.

Canada offers universal healthcare, which is available to all citizens and permanent residents. While emergency services are available to anyone in the country — even without a government-issued health card — walk-in clinics also exist but may cost a fee.

Taxes pay a portion of universal healthcare but residents and Canadian citizens also pay monthly or yearly premiums. The government also has educational programs made to increase public awareness to reduce potential healthcare costs. Universal healthcare, along with educational programs, increase life expectancy and quality of life for Canadian citizens and residents.

While federal income taxes in the U.S. range from 10% to 37%, Canadians have a different tax structure. For 2020, Canadians making $48,535 or less are taxed at 15%. From $48,535 to $97,069, Canadians are taxed at 20.5%. From $97,069 to $150,473, it’s 26%. For $150,473 to $214,368, it’s 29%. And for Canadians earning more than $214,368, they’re taxed at 33%.

It may be helpful to compare these figures to the U.S. tax brackets, though be sure to use a tax calculator to see how state taxes factor in.

Beyond the federal level, taxes in Canada also vary by province. All provinces have some level of local tax and are based on a percentage of the federal tax system. For 2020, Canadians also will pay an Employment Insurance tax of 1.58% of their gross employment income.

Canadians also pay less of their wages into their equivalent of Social Security compared to U.S. residents. In 2020 Canadians will pay 5.25% of gross employment income into the Canadian Pension Plan (CPP), up to $55,200. Medicare is included in Canada’s universal healthcare plan. Americans will pay 7.65% of their wages into Social Security and Medicare in 2020.

Before you head over the border, review not only your financial situation but your emotional one as well. There might be other reasons to stick around (or ones that encourage you to leave). Ask yourself a few questions, like:

1. Will I be able to find work if I need to? Retiring doesn’t always mean you’re no longer working. Sometimes you want a job, perhaps part-time, to stay busy or earn a little extra cash. What will the job hunt look like?
2. What happens to my benefits? If you collect disability, Social Security or other U.S. benefits, there’s a chance those don’t roll over when you move out of the country.
3. Am I financially dependent on someone else? If you rely on family or a loved one to take financial care of you, moving to Canada might not be an option.
4. Does someone else financially depend on me? If you’re responsible for someone else’s financial well-being, this may hold you back from moving.
5. Can I move wherever I want to? If there’s a state in the U.S. you wouldn’t live in, there’s a chance there are places in Canada you wouldn’t move to, either. If the cost of living is a factor in where you can (and can’t) move, you might be limited in your potential new digs.
6. Would it be easier to move? When you consider your residency status, cost of living and realistic expectations, you may find that moving to Canada might not be as easy as you thought.
7. What if I stay? If you collect government benefits, your home is paid for or you have a low cost of living, and can afford to stay through retirement, think about what you’d be losing out on.

Retiring in Canada might sound appealing. But relocating to another country might turn out to be more work than you’re willing to put in. Review your finances, your long-term care and how the move can impact your loved ones before you decide. Weighing all your options can help you make a better decision than if you were to act without much consideration.

• Consider talking to a financial advisor about what’s involved in retiring in Canada. Finding the right financial advisor who fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.
• Whether you want to retire in Canada or the United States, or any other country for that matter, it’s important to have a clear sense of your financial resources. Use this retirement calculator to gauge just how prepared you are to retire.

Photo credit: ©iStock.com/Jarmo Piironen, ©iStock.com/Pgiam, ©iStock.com/YayaErnst

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