Spousal RRSPs are becoming a strategic tool as household incomes even out

Advisors say spousal RRSPs are less commonly used now that more households have two earners, but they still serve targeted roles such as offsetting a large taxable year or rebalancing retirement assets between spouses.

Spousal RRSPs are being used less often as household incomes have become more balanced, but advisors say the accounts still have defined uses in some situations. Traditionally, a spousal RRSP let a higher-earning spouse reduce taxable income while building retirement savings for the lower-earning spouse. Many couples now favour individual RRSPs and rely on 50-per-cent income splitting after age 65 from RRIFs or defined-benefit pensions to equalize retirement income. Today, advisors describe spousal RRSPs as a strategic tool for specific timing or tax events. Key points: - Spousal RRSPs were traditionally used to shift taxable income from a higher-earning spouse to a lower-earning spouse. - More households with two earners often choose individual RRSPs and use income splitting after age 65 instead of spousal RRSPs. - Advisors report using spousal RRSPs to reduce a higher earner's net income in years with unexpectedly large taxable events, such as capital gains from a property sale. - Attribution rules apply: withdrawals made within three calendar years of a contribution are taxed to the spouse who made the contribution. - Converting a spousal RRSP to a spousal RRIF can remove attribution for mandatory minimum withdrawals, but any amount withdrawn above the minimum may be taxed back to the contributor. - Some advisors use spousal RRSPs to rebalance retirement savings when one spouse plans to retire earlier or when one spouse is the primary breadwinner, as reported for certain client groups like midwives. Summary: Spousal RRSPs are now described as a narrower planning option rather than a routine choice, useful in cases such as a year with unexpectedly high taxable income or when spouses retire at different times. Undetermined at this time.