Comparing IRA Across USA, UK, and Canada

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Retirement planning envisages a wide range of considerations starting from retirement destination, budgeting for future vacations, determining the ideal retirement fund, choosing and investing in IRA that will help you achieve the retirement savings goal etc. While your retirement destination can be chosen based on the weather conditions and the entertainment facilities in that place, you can consider yourself safe and secure only when the incentives that the government gives to its retirees are given their due weight.  Retirement plans can be made taking note of the subtle differences that do exist in types of services that the government provides to the retirees in the USA, Canada, and the UK.

Comparing IRA Across USA, UK, and Canada

The traditional IRA of USA vs RRSP of Canada

The RRSP or Registered Retirement Savings plan of Canada is very much similar to the traditional IRA or Retirement plans of the USA. The contributions you make in them are are tax-deductible and the capital gains are tax-deferred till the date you start receiving distributions at the age of 70 and a half, from which mandatory distributions are compulsory.

The unique alternatives that the Canadian investors in RRSP in Canada can make use of to avoid excess taxes include

  • Tax deduction on the yearly contributions which will result in benefits of compound returns by virtue of tax efficient growth that results in the greater time value of money.
  • You can also make contributions until the age of 71. The maximum limit of the amount that you can contribute is $26.019 as on 2017 while that for traditional IRA of USA is just $5,500 and an additional$1000 if you are over 5o years of age.
  • When you turn 71, the RRSP must be crashed out and rolled over to an annuity or a Registered Retirement Income Fund.
  • Though increased savings will provide tax benefits, you can still see wealthy Canadians paying more tax than the retirees in the USA.

The Roth IRA of USA Vs TFSA of Canada

The Tax-Free Savings Account TFSA is similar to the traditional and Roth IRA found in the USA. There is no limit either in when to stop making contributions or when to begin withdrawing money except that the contribution should be made by those who have attained the age of 18 and the contributions should not exceed $5,500 and for those above 50 years, the amount is fixed at $6,500.

Roth IRA of USA Vs TFSA of Canada
Roth IRA of USA Vs TFSA of Canada

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the two advantages of TFSA over American IRA’s include

  • The young Canadians have the option to carry over their contribution amount for future years. For example, if you are just 35 years old and you were not able to make a contribution of $5,500 this year, you will be allowed to make a contribution of $1,100 the next year. The cumulative amount that you can carry forward is, however, fixed at $52,000 at present and is subject to changes from one year to another.
  • The distributions you get out of IRA has to be qualified in order to get preferential tax treatment but, the Canadian retirement plan offers flexibility by providing benefits for those planning for retirement.

The IRA of USA and UK

In the UK between 2012 and 17, it has become mandatory for all employers to enroll all eligible employees in a retirement account plan and they are required to provide a minimum contribution which is similar to the 401(K) in the USA. If the employer does not due to some reason offer a contribution have to automatically enroll their employees in a National Employment Savings Trust which is a national retirement account.

The IRA of USA and UK
The IRA of USA and UK

Features

  • A minimum of 2 % of the earnings must be contributed, of which 1% must come from the employer
  • The contribution amount should increase to 8% by 2018and the employer contribution should be about 3% subject to an annual contribution limit of £4,400.
  • There would be an0.3% annual management charges and 1.8%carge levied on the contributions made.

This is supposed to be one of the attractive schemes that can ensure safe and secure retirement savings. Apart from this, there are the ISA’s and the PPPs which are private- funded options not as consistent as the Retirement plans in the USA and Canada.