Married and saving for retirement? Consider a Spousal RRSP

Spousal Registered Retirement Savings Plans are not universally understood by investors and are certainly not utilized to their maximum benefit.

These financial vehicles were designed to encourage retirement savings by giving tax breaks at the time of contribution and at withdrawal, just like regular RRSPs. 

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But Spousal RRSPs contain additional advantages for couples where one partner earns higher income than the other. The greater the income discrepancy between the two partners, the greater the potential benefit at time of withdrawal. 


The Spousal RRSP contributor (the higher income spouse) receives the initial tax benefit. Their taxable income is reduced by the amount of the contribution. So a $5,200 contribution reduces taxable income by $5,200 for the contributor whether it goes into their RRSP or a Spousal RRSP.

While on deposit, the investments grow tax free in a Spousal RRSP until the funds are withdrawn. If the money is withdrawn within three years of the deposit, then the income is attributed back to the higher income spouse. If the money is taken out after three years, then the income can be applied to the lower income spouse. 

At retirement, both spouses in the couple would begin to withdraw from their RRSPs (or RRIFs). If there is a large discrepancy in the amounts in their RRSPs, one spouse could have significantly higher income than the other. This can cause the family tax bill to be significantly higher.

As an example of the effects of balancing income without the aid of income splitting, a couple with one spouse earning $75,000 and the other at $0, will pay $18,017 in income tax in 2018. A couple with each partner earning $37,500 for a total of $75,000 will pay $12,114. A savings of nearly $6,000!


Together, along with your accountant, we should discuss the possibility of utilizing a Spousal RRSP strategy to reduce taxes now and during retirement.


Harley McCormick is a financial advisor at Keystone Wealth Management

The information provided on this article is intended for

informational purposes only and is not intended to constitute financial, accounting, and legal or tax

advice. For information specific to your situation you should consult a professional. Mutual funds

provided through FundEX Investments Inc.

Research provided by ADVISOR Research Group Feb. 1, 2019


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