US dollars in RRSP

[cbay]

Hi,

I'm new to the forum and hope someone can help me out.

I am a Canadian with a US trading account that has some cash. I'd like to increase US dollar exposure in my self-directed RRSP and I have unused contribution room that I'd like to draw down and get a refund. I'm thinking of purchasing a US ETF and doing a contribution-in-kind. I figure that is better that selling my US $ at current unfavorable rate and then buying a US security in CDN $ through my RRSP. This way I avoid the exchange hit and could pick a better time over the next 15 years to move US $ back into Canada,

Does this make sense? What am I missing?

Thanks in advance for any advice!

[AltaRed]

If you do a search of topics in this forum, you will find multiple threads discussing USD in RRSP accounts. Having said that, I believe only Questrade viewtopic.php?f=39&t=110825 offers a USD option so far within RRSPs.

[travesty]

You could also buy the USD denominated stock in your unregistered account and then transfer it in-kind to your RRSP. Although only Questtrade supports holding USD balances, you can get a similar (albeit less straightforward) effect by using an in-kind transfer combined with one of the brokerages which will will wash FX transactions - allowing movement between US positions (on the same day) with no FX vig. Scota iTrade is one example of such a brokerage.

[Norbert Schlenker]

Buying in the taxable account and then contributing in kind might save you a few dollars, but step back for a minute and think things over. It seems to me (and I could be misreading) that you want to do two things:

1. Make an RRSP contribution to generate a tax deduction.
2. Add some USD equities to your portfolio.

1 can be accomplished in myriad ways, including contributing Canadian cash or other securities entirely.

2 can be done in any number of ways. Why do you want to do it in the RRSP?

[newguy]

2. Add some USD equities to your portfolio.
.......
2 can be done in any number of ways. Why do you want to do it in the RRSP?

Isn't it tax advantageous to hold US domiciled securities in the RRSP for the preferential dividend tax treatment?

newguy

[Norbert Schlenker]

Barely. I'm not sure the advantage is sufficient that it warrants complicating bookkeeping.

[cbay]

Thanks for the responses. Norbert - I'm primarily looking for the tax deduction this year and I'd prefer to keep some exposure in the US. I've got free cash in a US account and not enough in Canada to contribute this tax year. The contribution in kind seems like a simple enough solution. I'll chat with my bank about setting it up.

I really appreciate the replies, so helpful

[DavidR]

RBC Direct investing is planning to allow US dollars in RRSPs soon.

There is a thread over in the Disount Broker sub-forum http://www.financialwebring.org/forum/viewtopic.php?f=39&t=111798

[Mods, sorry if I have posted the same info twice, but perhaps it belongs in both places...]

[adrian2]

From TD Waterhouse, hot off the important messages (bold as per original):

U.S. Dollar Investing in your TD Waterhouse RSP Account

Did you know that TD Waterhouse offers you the convenience of U.S. dollar investing in Canadian registered accounts , such as your Self-Directed RSP or Tax-Free Savings Account?

Here's How It Works

You can invest in U.S. dollars in your registered account by owning units of the TD U.S. Money Market Fund (symbol TDB166). This is a safe, secure fund which allows you to access your U.S. cash quickly with only 1 day settlement.

You can also use your U.S. Money Market Fund to settle the purchase of a U.S. security (or vice versa). Simply place your order to buy or sell a U.S. security using WebBroker. Once your order is filled, call an Investment Representative at 1-800-465-5463 to buy or sell sufficient units of your U.S. Money Market Fund. Our representative will then set the exchange rates for both transactions to be equal - eliminating the impact of a currency conversion.

You must call by 3:00 p.m. ET on the first business day after your order is filled. Our representatives are available to assist you 24 hours a day , seven days a week.

Furthermore, TD Waterhouse will automatically set the exchange rates to be equal when you buy and sell U.S. securities on the same day.

By following these tips you can take advantage of investing in Canadian and U.S. securities, all in one convenient account.

[marty123]

You can also use your U.S. Money Market Fund to settle the purchase of a U.S. security (or vice versa). Simply place your order to buy or sell a U.S. security using WebBroker. Once your order is filled, call an Investment Representative at 1-800-465-5463 to buy or sell sufficient units of your U.S. Money Market Fund. Our representative will then set the exchange rates for both transactions to be equal - eliminating the impact of a currency conversion.

You must call by 3:00 p.m. ET on the first business day after your order is filled

Wow. Are they trying to discourage people from doing it? Because they could had a few steps to the process if they wanted.

It leads me to believe ... are they:
a) not automating this process to discourage people from using it?
or
b) planning to automate this process, but were worried to lose customers to RBC if they didn't come up with a Mickey Mouse way to circumvent their short-comings in the mean time.?

[newguy]

b) planning to automate this process, but were worried to lose customers to RBC if they didn't come up with a Mickey Mouse way to circumvent their short-comings in the mean time.?

They've had this for a long time, it's what they called wash trades.

newguy

[adrian2]

They've had this for a long time, it's what they called wash trades.

The only new thing, AFAIK, is "TD Waterhouse will automatically set the exchange rates to be equal when you buy and sell U.S. securities on the same day", which saves a phone call in those cases. They are also formalizing what many of us have known to be available for a long time.

[marty123]

They've had this for a long time, it's what they called wash trades.

The only new thing, AFAIK, is "TD Waterhouse will automatically set the exchange rates to be equal when you buy and sell U.S. securities on the same day", which saves a phone call in those cases. They are also formalizing what many of us have known to be available for a long time.

Newguy, it wasn't automatic before...you had to call in to get it.
It's automatic now, but only for securities. You still have to call in to get your USD MMF transaction at spot.

[twa2w]

Further to DavidR post

RBC Direct investing is planning to allow US dollars in RRSPs soon.

I hear the date is mid to end of May. WIll apply to RSP. TFSA amd RIFs. Not sure about LIFs etc.

[Steve19]

With TDW now allowing purchasing US MMF in a TFSA/RSP, do you still have to pay a % (I think it's around 2% for TDW) for converting your CDN cash into US cash when purchasing US MMF?

[Shakespeare]

From RBCDI:

Introducing Dual Currency in Registered Accounts!

You now have the option of holding both U.S. and Canadian dollars in your registered accounts with the introduction of Dual Currency in Registered Accounts. Now, when you trade U.S. based securities in most of these account types (see list below) you can choose to settle in U.S. dollars to avoid the cost and inconvenience of foreign exchange from and to Canadian dollars. This new capability also gives you the flexibility and control to decide when and if you convert your U.S. dollars back to Canadian dollars.

For your existing registered account, the U.S. dollar side is automatically available, you do not have to request for it to be added - offering the convenience of managing the U.S. and Canadian sides within a single integrated account.

Dual Currency in Registered Accounts is available in the following existing and new accounts:

* Tax-Free Savings Accounts (TFSAs),

* Registered Retirement Savings Plans (RRSPs),

* Group RSPs,

* Registered Retirement Income Funds (RRIFs),

* Life Income Funds (LIFs),

* Locked-in Retirement Income Funds (LRIFs),

* Prescribed Retirement Income Funds (PRIFs),

* Restricted Life Income Fund (RLIF),

* Locked-in Retirement Account (LIRA),

* Restricted Locked-in Savings Plan (RLSP).

To learn more about this new capability for your registered account(s) view the frequently asked questions.

Despite the message saying "Now available", my display does not yet show the US dollar side in my TFSA, RRSP, or LRIF.

[DavidR]

Looks like RBC DI has some FAQs From the FAQs, as linked above at the bottom of Shakespeare's quote

Q:Will the U.S. securities be automatically transitioned to the new U.S. dollar side of my registered account?
A: The U.S. securities currently held on the Canadian side of the registered account will not be automatically transitioned to the U.S. dollar side of the registered account.

If you would like to have your U.S. securities transitioned to the U.S. dollar side of the registered account please contact an investment services representative at 1-800-769-2560 or send us a secure message with your instructions including the account number, name of the security and quantity of the security you would like to transition to the new U.S. dollar side of your registered account.

[bwalter]

Sounds like you need to have the securities moved to the U.S. dollar side of the account in order to avoid the forced conversion of dividends to CAD.

Q:How will my dividends be treated for U.S. securities if they are held on the U.S. dollar side of the account?
A:Dividends will be paid as normal. However, there will be no forced conversion to Canadian dollars if the investment is held on the U.S. dollar side of the account.

[Shakespeare]

Just called in to RBCDI and had my Vanguard ETFs journaled over. They should show up in US$ tomorrow.

[bwalter]

Just called in to RBCDI and had my Vanguard ETFs journaled over. They should show up in US$ tomorrow.

I sent a secure message with the same request last Friday. They responded yesterday and today I see my Vanguard ETFs in US$.

[bwalter]

So yesterday I decided to buy some more Vangaurd VTI shares. I placed an order for VTI shares on the USD side of my account (since I don't want the dividends converted). The order was filled so my next step was to get cash to the USD side of my account from BTB100 which is on the CAD side. I couldn't find any way to transfer, but then I realized I could just sell my BTB100 into the USD side of my account, or so I thought. After placing that sell order, I received a call from an RBC DI representative stating I must have made an error and that I needed to settle my sale of BTB100 on the CAD side of my account, and do the conversion afterwards. Again I searched the site and couldn't see any way to convert/transfer funds from the CAD side to the USD side of my RRPS account, so I sent off a secure email.

The response was that for now you have to call up to transfer funds between the CAD and USD sides of your RRSP accout, but they were working on providing that functionality online.

Looking back, it probably would have been easier to buy the VTI shares on the CAD side of my account and then request RBC DI journal them to the US side after the trade settled.

Anyhow, it should all work out (and I'll probably gain a little because the CAD has picked up some strength) but I just thought I'd give people a heads up on the process. For the moment I'm still waiting for the CAD from the BTB100 sale to show up in my account and then I will call in. I don't anticipate any problems because BTB100 has T+1 settlement while VTI has T+3 settlement so even if it takes an extra day for the funds to show in my account, I still have time.