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Spousal RRSP: Scenario

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, the Taxpayer has worked hard and will receive a monthly pension income of about $3,000 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. Bob is making about $54,000 a year (maybe a little high for a retiree, but stay with me).

  • 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 almost ALL of it).
  • He doesn’t get a GST kickback 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)

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