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.

Contributions, Withdrawals and Attribution rules

Your spousal RRSP contributions are tax deductible (they can lower your tax bill when you file your taxes). But it’s important to note that your spousal RRSP contributions use your contribution room. Your RRSP contributions won’t affect your spouse or common-law partner’s contribution room. 

After you’ve made a spousal RRSP contribution:

  • The money belongs to your spouse or common-law partner. They control the account, make the investment decisions and decide when to withdraw the money.
  • You can contribute to an RRSP until the year end in which the RRSP owner turns 71. Let’s say you're over age 71 and can’t contribute to your own RRSP anymore, but your spouse is younger. In this case, you can both still benefit. If you still have RRSP contribution room, you can keep putting money in a spousal RRSP. This way, you can continue to lower your tax bill with your contributions.

Regardless of the type of RRSPs you contribute to, you’re still responsible for staying within your RRSP contribution limit. Otherwise, you may face penalties for over-contributions.

With spousal RRSPs, there’s a three-year attribution rule that applies whenever you make a contribution. So how does that work? As an example, let’s say you’ve made a contribution to a spousal RRSP this year. Under the attribution rule, if your spouse makes a withdrawal in the current year or the next two years, then you (the contributor) will be taxed for those withdrawals. Connect with an advisor for more detailed information.  

Since your spouse or common-law partner is the owner of a spousal RRSP, they’re the only person who can make withdrawals from it. They can withdraw from a spousal RRSP at any time, but they’ll have to pay tax on those withdrawals. Keep in mind that the attribution rule can apply to the withdrawals. For any type of RRSPs, it’s often recommended to make withdrawals later in life – as many people find themselves in a lower tax bracket as they age. Being in a lower tax bracket means you’ll pay less tax on your RRSP withdrawals. 

Open a spousal RRSP

Our advisors are ready to help you open a spousal RRSP so that you can start saving more as a couple. They can also answer any questions you may have. 

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Who gets the tax deduction for a spousal RRSP?

The contributor to the spousal RRSP claims the tax deduction, not the owner of the spousal RRSP. For example, let’s say you contribute to a spousal RRSP that your spouse owns. Since you’re the contributor, the RRSP contribution receipt is issued to you, not to your spouse. So, you’ll get the tax deduction.

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When is it a good idea to consider contributing to a spousal RRSP?

If you expect that your spouse or common-law partner’s income in retirement will be significantly less than yours, you may want to consider contributing to a spousal RRSP that they own. When you contribute to a spousal RRSP, you also get the tax deduction for your contribution. The goal of using a spousal RRSP is to provide equal incomes for both spouses in retirement. As a couple, you may pay less tax overall in retirement. Connect with an advisor for more detailed information.

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How does a spousal RRSP and income splitting work?

Spousal RRSPs were designed to help couples split retirement income by allowing them to build equal amounts in retirement savings. When a higher-earning spouse contributes to their spouse’s spousal RRSP, they get the tax deduction. In retirement, each spouse or common-law partner will have an equal or similar income, so the couple will pay less tax than they would have paid if all their retirement savings had been owned by one spouse or common-law partner.  Learn more about income splitting and how it works.

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Can I transfer my individual RRSP to a spousal RRSP?

You can transfer funds from one RRSP to another only if you’re the annuitant (the owner) of both accounts. To avoid any tax implications, it must be a direct transfer. This means you can’t make a withdrawal and then deposit the money into another RRSP you own, individual or spousal. You can make a direct transfer of your personal RRSP money to another personal RRSP you own, or to a spousal RRSP that you own. But if you transfer funds from your personal RRSP to your spousal RRSP, all the funds you deposit into your account will be governed by the spousal RRSP rules, even though some of the money came from your personal RRSP. Connect with an advisor for more detailed information. 

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When can I withdraw money from a spousal RRSP?

If you’re the owner of a spousal RRSP, you can withdraw from it at any time. But keep in mind that you’ll be taxed on your withdrawals. If you make a withdrawal before the three-year attribution period, the person who made the spousal RRSP contributions (your spouse or common-law partner) will be taxed, not you, but only to the extent of the contributions they made. You’ll be taxed on the rest, if any. For example, let’s say your spouse or common-law partner contributed $3,000 to your spousal RRSP within the three-year attribution period. You then withdraw $5,000. In this case, they’ll be taxed on the $3,000, and you’ll be taxed on the remaining $2,000.

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What happens if I make an early withdrawal from a spousal RRSP?

The early withdrawal period is the three tax years from when the withdrawal is made, including the year of the withdrawal. For example, if you make a withdrawal at any time in 2022, the early withdrawal period includes all of 2022, 2021 and 2020. You or your spouse or common-law partner will have to pay tax on the withdrawal.

If your spouse or common-law partner has contributed to your spousal RRSP during any of these years, they will have to pay tax on the withdrawal to the extent of their contributions. For example, let’s say they had contributed $5,000 during any of 2022, 2021 or 2020. Then you withdrew $8,000 from your spousal RRSP. In this case, they’d have to pay tax on $5,000 of the withdrawal, and you would have to pay tax on $3,000.

Once you take money out of an RRSP, personal or spousal, you can’t replace the amount you had previously put into your account. This may lower the value of your RRSP when you’re ready to retire. Connect with an advisor for more detailed information.

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What happens to a spousal RRSP if there’s a divorce?

In Canada, the law usually gives each spouse equal entitlement to the value of all RRSPs (including spousal RRSPs) owned by either person in the marriage. The early withdrawal rules require the contributing spouse to include some or all of a withdrawal in income if they have made a spousal RRSP contribution within the last three years (including the current year). However, these rules don’t apply when the spouses or common-law partners are living separate and apart because of a breakdown of their marriage or common-law partnership. Please consult with a legal professional for more information. 

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Got more questions?

Connect with a Sun Life advisor for answers to your RRSPs questions. An advisor can provide more detailed information and figure out a plan that works for you.

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