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Old 04-09-2018, 11:51 AM   #1
Izzle
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I have a question regarding Spousal RRSPs and figured this would be the best place to ask.

I have a personal RRSP (regular contributions) as well as a spousal RRSP in my wife's name (sporadic contributions). I have a matching RRSP plan with work and have the higher income in the marriage. As it stands currently, my RRSP is 3 times that of my wife's.

Over the weekend, we met with another couple in a similar situation as us (one spouse is higher income earner). They mentioned that they try to keep their RRSPs as close as possible to each other. They figure, in retirement, it's better for two people to withdraw $25,000 each rather than one giant $50,000 withdrawal from the bigger RRSP. They would save on taxes.

My question is, is that really the case? And if so, should I stop making contributions to my own RRSP and instead contribute to my wife's? Once both RRSPs are similar, I'll continue making equal contributions to both RRSPs.
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Old 04-09-2018, 12:05 PM   #2
Slava
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It is the case, up until age 65. At age 65 you can split the pension income, and it's a non-factor as far as having the spousal. This becomes a factor when it comes to things like government benefits and that sort of thing. Obviously, until age 65 if you are retired, you aren't able to reduce your taxes in that way either, so it could be a concern there.
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Old 04-09-2018, 12:13 PM   #3
Locke
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Originally Posted by Izzle View Post
I have a question regarding Spousal RRSPs and figured this would be the best place to ask.

I have a personal RRSP (regular contributions) as well as a spousal RRSP in my wife's name (sporadic contributions). I have a matching RRSP plan with work and have the higher income in the marriage. As it stands currently, my RRSP is 3 times that of my wife's.

Over the weekend, we met with another couple in a similar situation as us (one spouse is higher income earner). They mentioned that they try to keep their RRSPs as close as possible to each other. They figure, in retirement, it's better for two people to withdraw $25,000 each rather than one giant $50,000 withdrawal from the bigger RRSP. They would save on taxes.

My question is, is that really the case? And if so, should I stop making contributions to my own RRSP and instead contribute to my wife's? Once both RRSPs are similar, I'll continue making equal contributions to both RRSPs.
Yes, because marginal tax rates increase as income increases so in retirement you want both spouses to have relatively equal savings that they draw at a relatively equal pace.

Having one spouse with all of the savings and another with none poses taxation problems, there are other factors at play there like Pension Splitting and Dependent credits, etc, but generally you will be better off with equal RRSP savings.
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Old 04-09-2018, 12:31 PM   #4
Izzle
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Originally Posted by Locke View Post
Yes, because marginal tax rates increase as income increases so in retirement you want both spouses to have relatively equal savings that they draw at a relatively equal pace.

Having one spouse with all of the savings and another with none poses taxation problems, there are other factors at play there like Pension Splitting and Dependent credits, etc, but generally you will be better off with equal RRSP savings.
Thanks for the info.

I think over the next few years, I'll have to contribute more to the Spousal RRSP in order for it to catch up to my RRSP. Regardless, I should be able to claim the tax deduction no matter whose RRSP I deposit into.
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Old 04-09-2018, 12:38 PM   #5
Locke
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Thanks for the info.

I think over the next few years, I'll have to contribute more to the Spousal RRSP in order for it to catch up to my RRSP. Regardless, I should be able to claim the tax deduction no matter whose RRSP I deposit into.
Again correct. And you should want to. The higher income earner (assuming room) should be shielding their income at the higher marginal tax rate by contributing to a spousal rrsp while also providing their partner with retirement income and sheltering that income somewhat buy splitting it.
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