Advantage of a spousal RRSP

What is the advantage of a spousal RRSP?

A spousal RRSP is an RRSP to which a spouse makes contributions on behalf of the other spouse. Spousal RRSP contributions are useful for couples who want to save taxes during retirement. It allows drawing smaller amounts from the spouses' respective plans, instead of one spouse drawing a larger amount – and paying more income tax. This strategy is called income splitting.

All or part of an RRSP contribution can be directed to the RRSP of a spouse, while maintaining the deductibility of the full amount in the hands of the contributor. The spouse's maximum RRSP deduction is unaffected by such contributions. However, Revenue Canada requires that withdrawals from the spousal RRSP during the current taxation year or preceding two years, be added to the contributing spouse's income in the year of withdrawal.

Contributions to the spouse's RRSP may be deposited until December 31 of the year in which the spouse becomes age 71, without regard to the age of the contributing spouse.

A spouse is defined as a person who lives with and is engaged in a conjugal relationship.

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