Canadian Personal Finance Blog

So the best way to see the advantages of a spousal RRSP for your retirement (there are other advantages, that hopefully I will cover later), is by doing a simple calculation. Let’s assume we live in Ontario (the good) for this one (check out the Revenue Canada Rate link here if you want where I pulled these numbers out).

Bob Taxpayer has worked hard and will receive a monthly pension income of about $3,000 a month, and he has also saved up enough money in an RRSP for himself so that he can set up an RIF that pays about $1,500 a month and he receives CPP and old age security as well. This means that Bob is making about $54,000 a year (maybe a little high for a retiree, but stay with me on this).

• The pension income (which I am not positive on the taxation of, so be careful here), pushes him into the second tax bracket, so that the $1500 a month from his RIF is now taxed at 22% Federally plus the Provincial tax on top of that.
• The Old age security will be clawed back because Bob has too much income (i.e. he loses pretty much ALL of it).
• My guess would be he doesn’t get a GST kick back or property tax break either.

Holy crap! Now hopefully Bob has paid his house off, and has a low debt load (i.e. just monthly bills), and he should be a happy man.

But what if Bob had put his RRSP money in a spousal RRSP? (answer tomorrow)

–C8j