# Spousal RRSP or not?



## Fisherman30 (Dec 5, 2018)

Good day everyone,

Just a question regarding spousal RRSP's. I have an RRSP, and my Wife also has an RRSP. Both accounts are in our own names, with neither of them being a spousal RRSP. I'm just having trouble understanding the point of a spousal RRSP. I understand wanting both accounts to be of equal value, that so when we retire, the income is split evenly, and we can both be in a lower tax bracket. Having said that, if I notice her RRSP is of lower value than mine, what's to stop me from simply transferring money from our joint savings account into her RRSP? Wouldn't that basically end up accomplishing the same thing?

Thanks!


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## pwm (Jan 19, 2012)

It appears your wife is working and has earned income so there is no reason why you would want a spousal RRSP. When your spouse does not work outside the home, and has no earned income with which to qualify for RRSP contributions, then a spousal RRSP is very beneficial. In my case, my wife did not work, so I did equal contributions to her spousal and my personal RRSP. Now that they are converted to RRIFs, our RRIF income is roughly equal. If I had a do over, I would have put all my contributions into the spousal, and not even opened an RRSP in my name, so that all the RRIF income would be on my wife's tax return.

With pension income splitting, half of my RRIF income goes on her return (75% of the total), so that helps.


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## OptsyEagle (Nov 29, 2009)

The idea is to have equal income in retirement. RRSP planning is just one tool in that regard.

Obviously you want the contribution to go into the hands of the person in the highest tax bracket and the withdrawal in retirement, to be used to equalize income. You also have to be sure that the person contributing the RRSP contribution, actually has the room to deduct this contribution on their tax return.

All that said, after age 65 all this RRSP stuff becomes redundant with respect that the RRSP withdrawals now form part of the income splitting that can be done with pensions. So in effect, spousal RRSPs really only help until the owners are age 65, assuming they don't change the rules.

As long as you each have enough money in the respective RRSPs, to deal with the income splitting withdrawals, before age 65, then it really does not matter how much is in either RRSP. Since it is very unlikely that you will both die at the same time, and I think the law requires the doctors to pick one, even when that happens, you have to realize that at some point in your lives, all the RRSP money will eventually be in one person's name.

So with all that said, spousal RRSPs are useful but a little overrated these days. The common wisdom of ensuring equal amounts in RRSPs, is all wrong. One wants equal income in retirement. With respect to that, all other incomes need to be taken into account. Work pensions, CPP, OAS, investment and rental incomes, even employment incomes.


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## Eclectic12 (Oct 20, 2010)

Fisherman30 said:


> ... I'm just having trouble understanding the point of a spousal RRSP.


My co-worker is in the 43% MITR range while his wife, in a good year is at the 29% MITR range. There's also that her pension with eight years credits will give retirement income of $2.4K a year *if* investments track at or above target. 

It seems to be a win - win to be deducting against the RRSP contribution against his higher income and later to be withdrawing to report income with her lower retirement income. CPP and OAS will also be much lower than his for her. Note that they both plan to retire before age 65 so the splitting through the spousal RRSP is useful.

IOW ... YMMV.




Fisherman30 said:


> ... I understand wanting both accounts to be of equal value, that so when we retire, the income is split evenly, and we can both be in a lower tax bracket. Having said that, if I notice her RRSP is of lower value than mine, what's to stop me from simply transferring money from our joint savings account into her RRSP?


Where you give her money to make an RRSP contribution, she gets the RRSP deduction against her income *but* you have to report these amounts as income on your tax return when withdrawn. I believe CRA assumes all withdrawals are your contributions until yours are completely removed. Maybe the income splitting after 65 makes this moot but before age 65, it likely kills the idea of an even income split for some years.
https://www.theglobeandmail.com/glo...eeling-the-sting-of-the-taxman/article621653/

Where one respects the withdrawals rules for a spousal RRSP - the tax deduction is yours, you are still evening out the total of her RRSPs (personal and spousal) against what your total RRSPs are, the withdrawal income reporting is all hers (may not matter after age 65) and there is no risk of issues with CRA.


Cheers


*PS*
Like OptsyEagle says, total income should be considered as well as the planned withdrawal schedule. Going back to my co-worker, having equal sized total RRSPs does not make sense when her private pension is likely to be 8x smaller than his private pension, plus smaller CPP/OAS etc.


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## ian (Jun 18, 2016)

Based on our experience, I really believe that this is a big 'it depends'. It depends on your income level when you make the contribution. It depends on what you think her income will be at retirement, either before or after you split any eligible retirement income.

It is not just income level for incremental tax bracket at retirement that you need to be concerned about, it is also OAS claw back, if this is a concern to you. I think it also depends on what investments you select for the RRSP. We were always careful to keep equities that we purchased for capital appreciation outside of our RSP. We tended to keep our straight income producing funds inside the sheltered accounts. 

I suspect that many people will have slightly different sets of financial and personal parameters that will not make the answer one size fits all.


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