Should I get a spousal RRSP?

Should I get a spousal RRSP?

Spousal RRSPs are ideal for couples with unbalanced incomes.


couple_talking_322Spousal RRSPs can save couples a lot of money, although they are less important than they used to be. The idea is to equalize the incomes of the spouses as much as possible to reduce your tax bill. It works because you pay far more tax on a single $100,000 income than you do on two $50,000 incomes.

The best way to use them is for the higher earning spouse to contribute to a spousal RRSP in his or her partner’s name. These contributions will use up some of that person’s contribution room, but when the RRSPs are wound up, you’ll have two smaller incomes instead of one big income so you’ll save on taxes.

Still, spousal RRSPs are less popular than they used to be. That’s because recent changes allow couples over 65 to split their income from RRIFs, annuities and pensions for tax purposes.