Navigating Your Canadian Finances When Considering Relocation (Temporary / Permanently): Impact on TFSA, RRSP, FHSA, CPP OAS and Insurance

Finances to sort out care while leaving Canada

Are you thinking about leaving Canada—either for work, retirement, or a change of scenery? Before you pack your bags, it’s crucial to understand how your finances will be impacted. If you don't plan properly, you could lose thousands in penalties, missed opportunities, or unexpected taxes.

In this guide, I’ll break down how key Canadian accounts and benefits—including the TFSA, RRSP, FHSA, CPP, and OAS—are affected when you leave Canada and become a non-resident. Whether you're a retiree escaping the winter, a digital nomad seeking lower taxes, or simply relocating permanently, here’s what you need to know.

And don't miss the bonus tip at the end on what to do with your home before leaving—it could save you tens of thousands of dollars!

1. Tax-Free Savings Account (TFSA) – What Happens Abroad?

Let’s start with the TFSA, one of the most flexible and tax-advantaged accounts available to Canadians.

The Good News:

• Your existing TFSA continues to grow tax-free in Canada.

• You can keep your account open and withdraw money anytime—even as a non-resident.

• If you return to Canada and regain residency, you can resume normal contributions.

The Bad News:

• No new contributions allowed while you're a non-resident. If you do contribute, you may be subject to a 1% per month penalty on the contributed amount.

  • Example: A $5,000 contribution could cost you $600/year in penalties.

• You do not earn new contribution room for any years you’re non-resident.

• Your new country may tax TFSA gains. For example, the U.S. does not recognize the TFSA and may tax it as a foreign trust.

TFSA Pro Tip: Max out your TFSA before leaving. It keeps growing tax-free in Canada, and avoids future penalty risks.

2. Registered Retirement Savings Plan (RRSP)

The RRSP remains one of the most powerful tax-deferred investment vehicles, even if you move abroad.

What Stays the Same:

• RRSPs stay open and continue to grow tax-deferred in Canada.

• You can manage the account and convert it to a RRIF when needed.

What Changes:

• You can contribute if you have unused Canadian-earned contribution room.

• But you do not generate new RRSP room while you're a non-resident.

• Withdrawals are subject to a 25% withholding tax, unless reduced by a tax treaty (e.g., 15% for U.S. residents).

• You can still convert RRSP to a RRIF and start income payments while abroad, subject to the same withholding tax or treaty benefits

Taxation Abroad:

• Some countries (like the U.S.) recognize the RRSP and allow tax deferral.

• Others may tax RRSP gains or withdrawals depending on their domestic laws and treaty status.

RRSP Pro Tip: Understand your destination country's treaty with Canada to avoid double taxation or plan optimal withdrawal strategies.

3. First Home Savings Account (FHSA)

The FHSA is Canada’s newest registered account for first-time home buyers. But what happens to it when you leave the country permanently?

Key FHSA Rules for Non-Residents:

• If you become a non-resident of Canada after you open your FHSA, you can continue to participate normally in your FHSA, with one exception: You cannot make a qualifying withdrawal to build or buy a qualifying home while you are a non-resident of Canada

• Withdrawals from an FHSA made after you become a non-resident:

  • Do not qualify as a tax-free "qualifying withdrawal," even if used to buy a home.

  • Instead, they are considered taxable—both in Canada and possibly in your new country.

• Any gains on investments in the FHSA may also be taxed by your new country.

What Should You Do?

• If you don’t plan to buy a home in Canada anymore, consider:

  • Withdrawing funds before you leave (if eligible under the home purchase rules).

  • Or transferring the funds to your RRSP, tax-free, without affecting your contribution room—this keeps the tax deferral benefit.

FHSA Pro Tip: Before leaving Canada, evaluate your FHSA strategy carefully. Transferring to an RRSP might preserve tax-advantaged growth if homeownership in Canada is no longer in your plans.

4. Canada Pension Plan (CPP)

Your CPP benefits are based on your contributions while working in Canada. Fortunately, CPP is portable.

Here’s the good news:

• You could briefly mention that CPP benefits are not affected by work status or residency, making it different from OAS.

• You continue to receive CPP payments no matter where you live.

• The payment amount doesn’t change based on your country of residence.

Tax Considerations:

• CPP payments are typically subject to a 25% withholding tax for non-residents (You can get the withheld taxes back while filing).

• This can be reduced or eliminated through tax treaties (e.g., U.S. residents may pay less or no tax on CPP).

• Some countries also tax foreign pensions, so check your new country’s rules.

CPP Pro Tip: Consider CPP pension splitting with your spouse to lower your overall tax liability if both of you are receiving benefits.

5. Old Age Security (OAS)

OAS eligibility depends on how long you’ve lived in Canada after age 18.

Eligibility While Abroad:

• You can receive OAS abroad if you've lived in Canada for at least 20 years after turning 18.

• If not, you might still qualify under a social security agreement with your new country (Canada has over 50 such agreements).

What You May Lose:

• You will lose the Guaranteed Income Supplement (GIS) and other allowances when you leave Canada.

• These benefits are only available to residents.

Taxation:

• OAS is subject to the OAS recovery tax (claw back) if your income is too high. design a Cash value Insurance policy to prevent claw backs.

• Non-residents may need to file Form NR5 annually to reduce withholding tax or file additional returns if income thresholds are exceeded.

• Without a treaty, OAS is subject to 25% withholding tax. With a treaty (e.g., U.S.), this may be waived.

OAS Pro Tip: If you’re nearing retirement and have high income, consider delaying OAS to age 70—your payments will increase by 0.6% per month, or 7.2% annually.

6. Insurance Coverage After Leaving Canada

Your insurance needs and coverage can change significantly when you leave Canada.

🩺 Health Insurance:

• Provincial health care (e.g., OHIP in Ontario) typically ends after 6 months abroad.

• Some provinces allow temporary absence coverage, but you must apply in advance.

• You’ll likely need private or international health insurance in your new country.

  
  

⚰️ Life Insurance:

• If you own a Canadian life insurance policy, it typically remains valid when you move abroad.

• However, inform your insurer of your new address, especially if your residence changes for tax or legal purposes.

  
  

💼 Disability and Critical Illness Insurance:

• Yes, it is possible to receive your critical illness benefit if your diagnosis was made outside Canada or the United States —check your policy terms based on the provider.

  
  

✈️ Travel Insurance:

• Most Canadian travel insurance policies are only valid for short-term travel.

• Long-term expatriate coverage must be arranged separately—Canadian travel insurance

  won’t cover ongoing medical needs abroad.

  
  

💡 Insurance Pro Tip:

Before moving, review all your policies with an advisor to determine:

• What stays valid,

• What needs to be replaced,

• And how to maintain proper coverage abroad.

• In most cases it's cheaper to take insurance in Canada compared to most other countries ( due to higher mortality age in Canada ).

Bonus Tip: What To Do With Your Canadian Home Before You Leave

One of the biggest financial pitfalls for Canadians moving abroad is not selling their home before they leave.

Why?

If you sell your principal residence after becoming a non-resident, the Principal Residence Exemption no longer applies.

Principal residence exemption (PRE) can be claimed if the non‑resident seller was a Canadian resident during some years of ownership and meets the PRE criteria. To claim the PRE, a designation using form T2091 must be completed with the T2062 filing.

Example:

• Home bought for $500,000

• Value increased to $800,000

• Sold after becoming non-resident: You may owe capital gains tax on $300,000

• Potential tax bill: Upwards of $75,000

Home Sale Pro Tip: Sell your home before establishing non-residency to take advantage of the tax-free principal residence exemption and avoid a massive tax bill.

Final Thoughts

Leaving Canada is a life-changing decision, and it comes with serious financial consequences if you're not prepared. Every account—from your TFSA, RRSP, and FHSA to your CPP and OAS—has unique implications when you move abroad.

To avoid penalties and preserve your wealth, consult a cross-border financial advisor or tax professional well before your departure. This ensures your money continues to work for you—no matter where in the world you choose to live.

Need Help Planning Your Exit from Canada?

Contact us to create a personalized strategy that fits your goals and destination.