Spousal RRSPs

When reviewing your RRSP needs, one of the most important things to consider is how you and your spouse's income will be taxed after retirement.

Tax Brackets

If one spouse will be in a higher tax bracket in retirement, as much of the RRSP funds as possible should be accumulated in the name of the spouse who will be in the lower bracket. The income eventually created from the funds will then be taxed at that spouse's lower tax rate.

Setting up a Spousal RRSP

To set up a spousal RRSP, your spouse applies for a plan in his or her name, even though your spouse may not have any earned income. Although you make the contributions to the plan, the assets of the plan belong to your spouse.

Contribution Age Limit

Even if you are over 71 years of age, you can contribute to an RRSP for your spouse until the end of the calendar year in which your spouse turns 71.

Separate RRSP Plans

If your spouse also wishes to contribute to an RRSP based on his or her own income, a plan separate from the spousal plan is strongly recommended.

Pension Income Credit

One final note - having RRSP funds in both spouses' names will ensure that both of you can qualify for the Pension Income Credit by age 65.


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