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Benefits of Opening a Spousal RRSP in Canada – Contribution & Withdrawal Rules

Benefits of Opening a Spousal RRSP in Canada – Contribution & Withdrawal Rules

Benefits of Opening a Spousal RRSP in Canada

What is a Spousal RRSP?

Spousal RRSPs are tax-deferred accounts that allow you to contribute money each year for your spouse’s retirement. Your spouse will see a tax-free return on that money until it is withdrawn. When you contribute to your spouse’s registered retirement savings plan (RRSP), you receive a tax deduction.

Spousal RRSPs allow couples to save on taxes while they are both working, and later in retirement. If you have a lot of money saved in your RRSP and your spouse has less, you may pay more income tax at retirement. If each person contributed equal amounts to their RRSP, they could pay less income tax in retirement.

How Can A Spousal RRSP Give You A Tax Deduction?

When you help your spouse save for retirement, you can both benefit because the higher-income earner gets a tax deduction when the money is put into the Spousal RRSP, and eventually withdrawals will be taxed at your lower rate. 

If your income is significantly higher than your spouse’s, you may get a bigger tax break by contributing to a spousal RRSP and claiming the deduction. That’s compared to what your spouse might receive in tax savings by contributing to their own RRSP.

It’s important to note that your RRSP deduction limit and contribution room applies to all your RRSP contributions, whether they’re made on your own behalf or in a spouse’s RRSP. On the other hand, your spouse’s contribution limit is not affected by your contributions to the spousal RRSP.

Can A Spousal RRSP Give You A Tax Break Later If You Are The Higher Income Spouse?

If you and your spouse earn different levels of income, you can even out their RRSP contributions by having the higher income partner contribute to a spousal RRSP for their spouse. If you’re the higher earning spouse, you’ll also get a tax refund when withdrawing money from your RRSPs. 

For example, let’s say you’re the spouse with the higher income and need to withdraw $5,000 a month as a couple, from your RRSPs. The extra funds you contributed to your spouse’s RRSP will allow them to withdraw a larger amount from their RRSP. This means that you would only need to withdraw a smaller amount from your RRSP, resulting in additional savings.

Even couples who don’t have a spousal RRSP can split up to 50% of eligible pension income. Eligible pension income can include withdrawals from a registered retirement income fund (RRIF) or income from a registered company pension plan.

How Can A Spousal RRSP Generate More Retirement Income?

Planning for retirement as legally married spouses or as a common law couple can be tricky, as you try to blend your individual financial goals and needs into a unified financial vision. Start with a discussion about both of your retirement goals. Specifically, how much income you can expect to live on and what kind of lifestyle you intend to live.

A spousal RRSP is a great way to even out your retirement savings between you and your partner. As a result, you’ll be able to withdraw similar amounts of money from your RRSPs every month once you reach retirement age.

A spousal RRSP is a way to pool retirement savings between a married couple or common-law partners, so that they are drawing from the same source and both paying less in taxes each year once they retire. With a “split income” strategy, you can build a nest egg that provides each of you with a source of income in retirement.

Who Owns The Spousal RRSP Plan?

A common scenario is that the spousal RRSP is registered under the lower income spouse and the plan is considered theirs. This person handles the investment decisions, and is the only one who is allowed to withdraw money. The spouse earning the larger income has an important role which is to contribute to the spousal RRSP.

When the annuitant is making contributions on behalf of the lower earning partner, it is taxable income just as it would be if they were making contributions for themselves.

The identity of the plans’ owner is determined by the annuitant. There are other possible scenarios, such as contributing over age 71 or with a younger spouse, which could have the plan registered under their name.

What Are The Rules For The Contributing Spouse Of A Spousal RRSP?

A three year attribution rule exists which means that if you put money in a spousal RRSP, you won’t be able to withdraw any contributions until at least three years after the date of your contribution.

Any money withdrawn within 3 years will be taxable income for the contributing spouse. Your annual RRSP contribution limit remains the same regardless of how many RRSPs you have.

As with a regular RRSP, you can keep contributing into your spousal RRSP until the end of the year your spouse turns 71.

A spousal RRSP can be converted into retirement income products like RRIFs or annuities when the account holder turns 71. When this happens the lower earning spouse pays taxes on retirement income in his/her own name at his/her current lower tax bracket.


If your marriage ends or you and your common-law partner decide to separate, your spousal RRSPs will be treated the same as your other assets. This means that your RRSPs can be transferred tax-free.

When one contributor dies, the RRSP can be rolled over tax-free to the surviving spouse or common law partner. This will mean that the money in your spouse’s RRSP is transferred to you and reported on your tax return for the year. Spousal RRSPs are an effective estate planning tool and useful as a means of providing a tax-free inheritance upon your death.

First step is to contact an Experior Associate to schedule a free, no obligation Expert Financial Analysis (EFA). Our financial associates will show you how to create and maintain a sustainable, secure future for you and your family.

We will help you determine if starting a spousal RRSP will be beneficial for you and your spouse’s unique financial situation. An Experior Associate will provide professional advice and be able to guide you through a spousal RRSP contribution, deductions, benefits, and investment decisions.

We are affiliated with over 26 insurance/ investment companies that provide many financial products. We have the latest recommendations for you, no matter what your risk tolerance or financial situation.

Let Experior Financial Group Associates show you how to invest wisely so that you can retire in the way you envision. The Expert Financial Analysis (EFA) only takes 20 minutes to an hour, and is well worth the investment of your time!

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