1. “
Spousal RRSPs: Why You
Should (Or Shouldn't) Take
The Plunge
TORONTO -- Canadian couples
with significantly different incomes
may want to consider using a
spousal RRSP to help cut their tax
bill in retirement, but experts say it's
all about balance.
"It's not something like: 'What,
you're married? You should get a
spousal RRSP,''' said Victor
Godinho, an adviser with VTAG
Financial Group Inc. "It's a real
analytical process. (Spousal
RRSPs) really make a difference at
the withdrawal stage so you want to
see, how do they (the couple) plan
on living out their lifestyle in retire-
ment? What's the cost benefit?'
A spousal RRSP is an account that
you set up, but that your partner
contributes to. They are held
separately and open to married or
common-law couples. Godinho said
the plans are most beneficial in
relationships where one spouse
earns significantly more than the
other. An example would be if one
spouse was working as an execu-
tive and the lower-earning spouse
worked as a contract worker or a
stay-at-home parent.
Also, if you cannot contribute to
your RRSP because of your age,
you can still contribute to your
spouse's account until the end of
the year they turn 71.
Scotiabank senior vice-president
Mike Henry said an important factor
to remember is that your allowable
contribution room does not
increase if you put money into a
spousal account.
If your contribution limit is $12,000
then you will still only be permitted
to put a total of $12,000 into any
type of RRSP whether it's in your
name or your spouse's. "You're
trying to keep each spouse in a
lower overall tax bracket,'' explained
Henry. "It's about balancing retire-
ment savings and balancing future
savings. It doesn't change anything
about contribution room.''
H&R Block Canada senior tax analyst Caroline
Battista said couples who plan on retiring early
-- before age 65 -- benefit from having a
spousal RRSP because they can divide the
RRSP withdrawals between them.
If all the RRSP funds are under one spouse's
name, the couple could have to pay more tax if
withdrawals were made before the age of 65,
before they could take advantage of pension
income splitting rules.
But Battista said a major caveat on a spousal
RRSP is that the spouse cannot withdraw from
the plan for three calendar years after the last
contribution, or that withdrawal will be taxed
against the contributing spouse. This rule
discourages a higher income earner to tempo-
rarily shelter funds under their lower income
earning spouse's name.
Couples should also keep in mind that money
put into a spousal RRSP belongs to the person
whose name is on the account -- which can
lead to issues if a divorce or separation occurs.
In the end, Battista said one of the biggest
reasons some of her clients have chosen to
have a spousal RRSP is for piece of mind.
"A spousal RRSP can give a spouse who is
earning no or little income a lot of comfort
knowing that they have some (retirement)
money,'' she said. "That it's in their name.''
Special to Huff Post Business By Linda Nguyen, The Canadian Press
Feb 02, 2015
"A spousal RRSP can give a spouse
who is earning no or little income a lot
of comfort knowing that they have some
(retirement) money,'' she said. "That it's
in their name.''
Client Care: 1-855-415-4075 | Office: (416) 915-4165 | Fax: (416) 915-3177Website: www.pangeafinancialplanning.com
In January 2015, PANGEA Global
Wealth Group Corporation acquired
VTAG Financial Group Inc. Mr.
Victor Godinho is now President
and Sr. Financial Planner at
PANGEA Personal Financial
Planning Inc. PANGEA Global Wealth Group
Corporation is a Canadian Controlled Private Corporation.
By having a spousal RRSP, a
couple is able to divide their
retirement savings more equally and
hopefully put themselves in a lower
tax bracket when they withdraw the
money in retirement.