For a 28-year-old woman who moved to Canada a decade ago to pursue higher education, the journey has followed a classic immigrant arc: years of hard work, a master’s degree, and now a well-paying job earning $120,000 annually. She and her partner recently bought a home, putting down $200,000 and taking on a $650,000 mortgage. With no other debt and Canadian citizenship on the horizon, the couple appears firmly rooted in their adopted country.
And yet, home keeps calling.
Despite her achievements, she says she misses India every day and struggles to envision spending the rest of her life in Canada. Alongside her partner, she’s begun planning an early retirement, one that doesn’t include staying in Canada. Instead, their vision lies thousands of miles away, back in the country they left behind.
That dream is now running into the complexities of cross-border financial planning.
A central question looms: should they continue investing in Canadian vehicles like RRSPs and TFSAs, or start building wealth in India to align with their long-term plans? The couple previously withdrew $70,000 from their RRSP under the First-Time Home Buyers’ Plan and now face a 15-year repayment period. But if they eventually leave Canada permanently, those same RRSP withdrawals could face a 25% withholding tax, raising doubts about the value of continued contributions, even with annual tax deductions.
The prospect of becoming non-residents adds another layer of complication. They are unsure whether Canada’s departure tax and the rules surrounding withdrawal of retirement savings would erode their nest egg. Transferring funds across borders, especially from a tax-sheltered account like the RRSP, can trigger costly penalties if not carefully managed.
At the same time, they’ve just begun exploring Canadian investment options, recently opening a TFSA and purchasing an all-equity ETF (VEQT). But they remain uncertain about the best strategy: should they build out their TFSA contributions first, or focus on repaying the RRSP? Would low-risk GICs offer better security, or should they go all-in on market-tracking ETFs to grow wealth faster?
There’s also the question of whether it makes more sense to skip Canadian investments altogether. If the end goal is a life in India, should they shift their capital there now to avoid future complications? And if so, what should they prioritise, real estate in Tier-2 cities, mutual funds through SIPs, or more traditional stores of value like gold?
“I would say max out your TFSA for sure”
Netizens swiftly reacted to the post. A user said, “I would say max out your TFSA for sure. Any withdrawal will be tax-free. With RRSP you get a deduction but income tax is payable when you withdraw. The thing is when I was your age, I too wanted to go back. But now I have zero desire. India and I have moved on in different direction. It does not feel like home.” “Lot can change between now and when you actually FIRE; Keep the money close to you where you have better control- max out retirement plans and save as much as you can post tax and invest in low fee index funds such as VTI, VOO, VEU etc. When you actually are ready to FIRE you can sell in chunks and do whatever you want to do,” added another.
“Your TFSAs are completely tax free on withdrawal. RRSP withdrawals are taxed based on the slabs of income in the year you withdraw. Basically it’s treated as income the year you withdraw. There is no “penalty” on RRSP withdrawal. It’s just a tax deferred instrument. It’s best you invest in Canada since it’s easier to control your funds while you are here. When you eventually move, your primary home can be sold with no capital gains tax. Your TFSAs can be completely withdrawn tax free. You need to be careful with RRSP though. Check the PFC(Personal Finance in Canada) forums to learn more,” said another user.