Withdrawing money from a spousal RRSP

You can’t skirt attribution rules but there are other options

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From the January 2016 issue of the magazine.

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Q: If I have two spousal RRSPs, can I stop contributing to RRSP No. 1 for three years and then begin to withdraw from it without being subject to attribution rules, even if during that time I contribute to RRSP No. 2?

—Murray Hooper, Cambridge, Ont.

A: “All for one. And one for all,” goes the mantra of the Three Musketeers. I think the Canada Revenue Agency is chanting that refrain when it comes to spousal RRSPs. “The CRA considers all spousal RRSPs as one, and all withdrawals from them subject to the standard attribution rules,” explains Cindy Brannan, an advisor with Toronto’s Brannan Investments. Spousal RRSPs allow couples to shift some savings from the bigger breadwinner to the smaller one, so that retirement income is taxed at a lower rate. The attribution rule basically says that your contribution must stay in the spousal RRSP for three years and prevents the spouse from immediately withdrawing that money, to avoid being taxed at the higher-income earner’s tax rate. David Stewart, a CFP with Toronto’s Stewart & Kett Financial Advisors, says that, “a legitimate way to avoid the rule would be to transfer the spousal RRSP to a RRIF and then have your spouse withdraw the minimum amount each year. There would be no attribution on a minimum RRIF withdrawal; however, any amount above the minimum would be attributed.

Bruce Sellery is a frequent guest on financial television shows and author of Moolala. Do you have your own personal finance question? Write to us at ask@moneysense.ca

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