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Should You Set Up a Spousal RRSP?


Tax advantages of spousal plans depend on income and age.

From the time you first started investing, you’ve likely been told how important it is to contribute to your registered retirement savings plan (RRSP). Your spouse has probably been given the same advice, which means there’s a good chance you each have your own RRSP. That’s great, but in some situations, contributing to a spousal RRSP may make more sense. 
 
Here are some of the most commonly asked questions I get about spousal RRSPs, which might help you decide whether they’re right for you.
 
What is a spousal RRSP?
A spousal RRSP is a retirement account that you make contributions to but is registered in your spouse’s (whether married or common law) name. That means your spouse controls the plan and will withdraw money from the plan when they reach retirement. 
 
Are there contribution limits?
You can find your annual contribution limit on the Notice of Assessment you receive from the Canada Revenue Agency (CRA) each year. The contribution limit the CRA gives you is the total that you can contribute to your own RRSP and a spousal RRSP. 
 
Keep in mind that your spouse’s contribution limit isn’t affected by the amount that you contribute to a spousal RRSP in their name.
 
Why contribute to a spousal RRSP?
There are two main reasons to consider a spousal RRSP: If your income is much higher than your spouse’s, or if you’ll turn 71 before your spouse. 
 
When you contribute to a spousal RRSP, you claim those contributions on your tax return, just as you would if you were contributing to your own RRSP. If your income is much higher than your spouse’s, that can mean a larger tax reduction than you would get if your spouse contributed to their own RRSP.
 
Contributing to a spousal RRSP can also have tax advantages when you and your spouse have retired. You’ll be helping your spouse build up their RRSP, which means they’ll be able to withdraw more money in retirement. And because your spouse has a lower income than you do, those withdrawals will generally be taxed at a lower rate than your own withdrawals would be. There are some exceptions to this, however. I encourage you to call our office to learn more.
 
Finally, age may be a factor for you. You can’t put money into your own RRSP after the end of the year in which you turn 71 but you can contribute to a spousal RRSP until the end of the year in which your spouse turns 71. This means that you can continue to build your spouse’s retirement savings and potentially reduce your tax bill as well. 
 
If you’re interested in setting up a spousal RRSP, or have more questions, call our office today.


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