How to become a snowbird?

Do you believe retirement down south is not in the cards? This exotic dream could become your reality… with a bit of financial and tax planning.

Swapping harsh Canadian winters for milder climes south of the border is not a stroke of luck. Snowbirds who achieve this lifestyle have crafted long-term plans and do not hesitate to ask for professional help to navigate through the myriad of laws, tax rules, real estate markets and the ins-and-outs of the insurance world.

Your advisor helps this dream come true

Do not try to improvise the snowbird dream without the help of a financial advisor. In order to succeed, this project requires meticulous long-term planning down to the last detail.

Start with an overview of your assets, from real estate to investments. You will have a better idea of what is possible and how much you need to save to escape south.

Besides saving for your dream retirement, you should also carefully plan your withdrawals. Are you going to convert your RRSPs into RRIFs, buy an annuity or choose a combination of the two?

How to handle the exchange rate?

Do exchange rate fluctuations give you heart palpitations?

Think about opening U.S. dollar investment account as soon as you make plans to spend winters south. The objective is to progressively buy U.S. currency so that the average outweighs rate fluctuations.

Length of stay

The number of days spent outside Canada can have a major impact on snowbirds.

An extended stay in the United States can turn snowbirds into U.S. residents. This change in status does come with tax-related consequences or could cause you to lose coverage under your provincial health insurance plan.

Ask an accountant or tax specialist for help as laws on the subject can be complicated. Find out the consequences of being considered a U.S. resident subject to taxes.

To rent or to buy? That is the question.

The experts all agree: it is better to rent than to buy… at least at first.

With a rental, you can be more mobile and have fewer financial impacts than owning a property. You will also give yourself a chance to discover where you want to hang your hat during winter.

Also take the time to assess if purchasing a property will work for you. You need to consider applicable laws, mortgage financing, insurance, taxation, transaction fees, etc.

The U.S. real estate market is complex. This is why we recommend you work with a real estate broker who will guide you through the mountain of paperwork.

Do not leave home without travel insurance

It is essential to have private travel insurance before heading south.

Provincial health insurance does not offer enough coverage if you should experience a health problem while out of country. Another thing to consider is medical costs in the States are staggering and could turn your dream winter into a financial nightmare

In order to be covered by travel insurance, insurers generally require the length of stay in the United States to be less than six months per year.

Manage your day-to-day expenses

Many snowbirds prefer to open an account at a bank in the U.S. to manage their day-to-day expenses when they are there.

Even if your financial institution has a local branch, it is no easy task to open a bank account in the U.S.

Ask about money transfers between your two accounts: Canadian and U.S.

In this regard, the Canadian Association of Snowbirds offers a special rate to exchange Canadian money into U.S. currency and transfer funds every month.

Your papers in order

Make sure all your paperwork is in order before crossing the border into the U.S:

• Do you have life insurance? If yes, do you need to update the beneficiary?
• Is your will up to date?
• Do you have a notarized protection mandate in case of incapacity (formerly called a power of attorney)?

Note: This blog post is provided for information purposes only. It is not a substitute for professional legal, financial or fiscal advice. For advice specific to your personal situation, always speak with your financial advisor. Travelinsurance.ca cannot be held responsible for any decision made as a result of reading this blog post.