What is a Spousal RRSP?
How do Spousal RRSPs work?
A spousal RRSP allows you to contribute money to your spouse or common-law partner's registered retirement savings plan, up to your personal contribution limit.
When a contribution is made to the spousal RRSP, the contributor receives a tax deduction.
This can help you balance your income as a couple and works best when a large disparity exists between you and your spouse's income.
By contributing to a Spousal RRSP, the higher-earning spouse receives a tax deduction that could lower their personal tax bill for the year.
On the other hand, the lower-earning spouse should get taxed at a lower marginal tax rate when the money is withdrawn from the Spousal RRSP. This means potentially paying less tax on your Spousal RRSP assets at retirement.
Benefits of Contributing to a Spousal RRSP
- Income splitting: Your Spousal RRSP allows you to potentially reduce the family’s overall tax bill in retirement by more evenly splitting sources of retirement income.
- Additional tax breaks: Contributing to your spouse's RRSP can help you defer tax. The higher-income earner gets a tax deduction when contributions to the Spousal RRSP are made; and eventually, withdrawals from the plan are taxed based on the marginal tax rate of the lower-income earner.
You may also be interested in:
Rules on Withdrawing from an RRSP
See what types of RRSPs TD offers
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