How does a spousal rrsp work?

A spousal Registered Retirement Savings Plan (RRSP) works in much the same way as any other RRSP. A spousal RRSP only differs from a personal RRSP in that it’s a plan to which you can contribute but remains in your spouse’s name and under their control.

Benefits include:

• An income tax reduction in the tax year you make a contribution, up to your annual contribution limit, even after you turn 71 as long as your spouse is younger than 71,
• Investments within the RRSP can grow tax-free, as long as no funds are withdrawn,
• RRSP funds are paid out after retirement and, while this income is taxed, it’s likely at a time when you and your spouse are earning less, and therefore in a lower tax bracket,

Spousal RRSP Contribution Limits:

• Your combined contributions to both your own RRSP and your spouse’s cannot exceed your annual contribution limit and still qualify for a deduction.
• Any amount over the limit will not qualify for a deduction.

Example:

If you contribute $6,000 to your RRSP account and another $6,000 to your spouse’s RRSP account in a tax year where your contribution limit is $10,000, you can only claim an RRSP deduction for $10,000. The remaining $2,000 will not qualify for the RRSP deduction in the current year, but you may be able to carry that amount forward to a year when you don’t use all your RRSP contribution limit.

For more information please visit:  Contributing to Spousal RRSPs

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