Spousal RRSPs help couples save by sharing

By making post-retirement income streams as equal as possible, couples can reduce their tax burden.

Matthew Elder 8 February, 2016 | 6:00PM

Sharing is an important part of a marriage, and this often means pooling income and combining assets for practical purposes. But when it comes to good tax planning, an important strategy is to "split" -- not physically, but in terms of how you report your income to the tax man. Determining who has the higher income, who holds investments (both income-generating and capital-gains producing), and who pays most of the bills can have a significant effect on your combined overall income-tax bill -- both now and in the future.

For example, depending on circumstances, it may make sense for the higher-income spouse to pay household expenses, and for the lower-income spouse to channel his or her earnings into investments. There are other more complicated income-splitting strategies, many of which must heed the general anti-avoidance rules. But when it comes to long-term financial planning, one of the longest standing and most effective tactics is the spousal registered retirement savings plan.

A spousal RRSP enables one spouse to contribute to the other's plan, and claim the related deduction on his or her own tax return. (Your contributions to a spousal RRSP do not affect your spouse's own RRSP contribution room. He or she can contribute each year to his or her maximum limit as well.)

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Matthew Elder

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