Last updated: January 25, 2023
What is a spousal RRSP?
A spousal RRSP is a type of registered retirement savings plan (RRSP) that’s available to married couples and common-law partners. It allows couples to build their retirement savings while potentially lowering the amount of tax they pay collectively, both now and in retirement.
Spousal RRSPs are set up in the name of one spouse or common-law partner. If you have RRSP contribution room, you can contribute to your personal RRSP, to your spouse or common law partner’s spousal RRSP or both.
With a spousal RRSP, your spouse or common-law partner becomes the annuitant (the owner) of the account. They make investment decisions for the account and can withdraw funds from the account at any time. You can contribute to a spousal RRSP, but only the annuitant can make withdrawals from it.
How does a spousal RRSP work?
Spousal RRSPs work best when there’s a disparity in income and savings levels between a married or common law couple. Take a look at this example:
- Spouse #1 has a high income and a lot of money saved for retirement.
- Spouse #2 has a lower income and less money saved for retirement.
Spouse #1 will likely have more money in retirement than Spouse #2. Since Canadians pay tax at higher rates as their incomes go up, Spouse #1 will have to pay more tax than Spouse #2 for every year of their retirement. However, with a spousal RRSP, the couple can contribute more money to Spouse #2’s savings, reducing the difference in their retirement incomes. The result? The couple will have similar retirement income as before, but will lose less of it to taxes. Connect with an advisor for more detailed information.