Split your income and pay less tax as a couple.
Connect with an advisor to open a spousal RRSP.
Last updated: December 19, 2023
What is a spousal RRSP?
A spousal RRSP is a type of registered retirement savings plan (RRSP) that’s available to married couples and common-law partners.* It allows couples to split their income and grow their retirement savings while lowering the amount of tax they pay together.
*Throughout this page, the term “spouse” refers to both married couples and common-law partners.
Income splitting lets the higher-earning spouse transfer a portion of their income over to their partner, who is usually in a lower tax bracket. This lowers a couple’s overall tax bill as there’s more taxable income in the lower earners' hands. See example.
Table of contents
- What is a spousal RRSP?
- How does a spousal RRSP work?
- Contributions, Withdrawals and Attribution Rules
- Frequently Asked Questions
Advantages of a spousal RRSP
- Building your retirement savings as a couple
- Splitting your income and potentially paying less tax
- Qualifying for government benefits
How does a spousal RRSP work?
Spousal RRSPs are typically set up in the name of the spouse who has a lower income. If you have RRSP contribution room, you can contribute to your personal RRSP, to your spouse or common law partner’s spousal RRSP, or both.
With a spousal RRSP, your spouse becomes the annuitant (the owner) of the account. They make investment decisions for the account and can withdraw funds from the account at any time. You can contribute to a spousal RRSP, but only the annuitant can make withdrawals from it.
Spousal RRSPs work best when there’s a difference in income and savings levels between a married or common law couple. When a higher-earning spouse contributes to their partner’s spousal RRSP, the higher-earner gets a tax deduction. The goal in retirement is for each spouse to have an equal or similar income. This means the couple will pay less tax than if all their retirement savings had been owned only by one of them.
Take a look at this example:
- Spouse #1 has a high income and a lot of money saved for retirement.
- Spouse #2 has a lower income and less money saved for retirement.
Spouse #1 will likely have more money in retirement than Spouse #2. Since Canadians pay tax at higher rates as their incomes go up, Spouse #1 will have to pay more tax than Spouse #2 for every year of their retirement. But, with a spousal RRSP, the couple can contribute more money to Spouse #2’s savings. This can help reduce the difference in their retirement incomes. The result? The couple will have similar retirement income as before, but will lose less of it to taxes. Connect with an advisor for more detailed information.
Contributions, Withdrawals and Attribution rules
You can get a tax deduction on the contributions you make to your partner’s spousal RRSP. But it’s important to note that your spousal RRSP contributions come from your contribution room. Your RRSP contributions won’t affect your spouse’s RRSP contribution room.
After you’ve made a spousal RRSP contribution:
- The money belongs to your spouse or common-law partner. They control the account, make the investment decisions, and decide when to withdraw the money.
- You can contribute to a spousal RRSP until the end of the year your spouse or common-law partner turns 71. Let’s say you're over age 71 and can’t contribute to your own RRSP anymore. But your spouse is younger than you. In this case, you can both still benefit. If you still have RRSP contribution room, you can continue to make contributions to your partner’s spousal RRSP. This way, you can continue to lower your tax bill as a couple with your contributions.
Regardless of the type of RRSPs you contribute to, you’re still responsible for staying within your RRSP contribution limit. Otherwise, you may face penalties for over-contributions.
With spousal RRSPs, there’s a three-year attribution rule that applies whenever you make a contribution.
So how does that work? As an example, let’s say you’ve made a contribution to a spousal RRSP this year. Under the attribution rule, if your spouse makes a withdrawal in the current year or the next two years, then you (the contributor) will be taxed for those withdrawals. Certain exceptions may apply. Connect with an advisor for more detailed information.
Since your spouse is the owner of a spousal RRSP, they’re the only person who can make withdrawals from it. They can withdraw from a spousal RRSP at any time, but subject to the three-year attribution rule mentioned above, they’ll have to pay tax on those withdrawals.
For any type of RRSPs, it’s often recommended to make withdrawals later in life – as many people find themselves in a lower tax bracket as they age. Being in a lower tax bracket means you’ll pay less tax on your RRSP withdrawals.
Open a spousal RRSP
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Frequently Asked Questions
Who gets the tax deduction for a spousal RRSP contribution?
The contributor to the spousal RRSP claims the tax deduction, not the owner of the spousal RRSP. For example, let’s say you contribute to a spousal RRSP that your spouse owns. Since you’re the contributor, the RRSP contribution receipt is issued to you, not to your spouse. So, you’ll get the tax deduction.
How much can I contribute to a spousal RRSP?
It’s 18% of your earned income, up to a maximum of $30,780 (the annual limit for 2023), plus any unused contribution room from previous years. Check your most recent Tax Notice of Assessment, log into the Canada Revenue Agency (CRA) website, or call the CRA to find out your contribution limit.
Keep in mind, yourRRSP contribution limitis the same regardless of how many RRSP accounts you have. For example, let’s say you have a spousal RRSP, agroup RRSP, and an individual RRSP. If your contribution limit is $30,000, you can divide that amount between all three of your RRSP accounts.
Can I transfer my personal RRSP to a spousal RRSP?
You can't transfer any part of your personal or spousal RRSP to anyone else, including your spouse. However, you can combine your own personal and spousal RRSPs into one RRSP. If you do, though, the combined RRSP will be treated as a spousal RRSP.
When can I withdraw money from a spousal RRSP?
If you’re the owner of a spousal RRSP, you can withdraw from it at any time. But keep in mind that you’ll be taxed on your withdrawals.
If you make a withdrawal before thethree-year attribution period, your spouse or partner will be taxed on your withdrawals. But they’ll be taxed only on the contributions they made. You’ll be taxed on the rest, if any.
For example, let’s say your spouse contributed $3,000 to your spousal RRSP within the three-year attribution period. You withdraw $5,000 during those three years. In this case, they’ll be taxed on the $3,000, and you’ll be taxed on the remaining $2,000.
What happens to a spousal RRSP if there’s a divorce?
In most Canadian provinces and territories, the value of property the spouses accumulated during marriage is split equally when their marriage breaks down. The spouse with the larger value gives the other spouse an equalization payment equal to half the difference. There's no requirement for assets to be split, but the law provides a mechanism for part or all of an RRSP or spousal RRSP to be transferred from one spouse to another if a judge orders or if the spouses agree as part of the process. Clients should seek legal and tax advice.Please consult with a legal professional for more information.
Is there a spousal TFSA?
No, there isn’t. At the moment, you can't contribute to your spouse's TFSA as you can with a spousal RRSP.
Got more questions?
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