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Spousal RRSP: Benefits for Retirement

So yesterday we saw that if Bob creates a monolithic income tower (i.e. all income comes through him) for his retirement, he could pay a lot of taxes.

If Bob takes advantage of the spousal rrsp income sharing or “income sharing” which is possible with the Canadian Spousal RRSP, his taxes could drop significantly:

  • His pension income remains taxed in his hands there is really no way to hide that income, so that stays where it is. (No, Wait! With Pension income splitting this is no longer the case!)
  • If previously he had put his RRSP money in a spousal RRSP that income is now taxed in his wife’s hands (and at her lower tax rate).
  • Given Bob’s income is lower, he most likely gets to keep his old age security (or at least more of it than in the single income model) and is more likely to be able to receive a property tax rebate and a GST rebate as well.

A Huge Advantage

As long as you invest your RRSP money wisely, there is no reason to get taxed as heavily as you did while you were working (remember, the Government hates single income families ).

Are there any other benefits of a spousal RRSP? Stay tuned

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