Spousal RRSPs: Smart Tax Planning

Spousal RRSPs are a uniquely Canadian tool for couples who want to reduce lifetime taxes by balancing retirement income. The setup is simple: the contributor spouse uses their RRSP room to contribute to an RRSP owned by the annuitant spouse. The contributor gets the immediate deduction, while the annuitant owns the account and will report withdrawals as income—subject to an important attribution rule.

Who claims the deduction and whose room is used?

The contributor spouse uses their own RRSP room and claims the tax deduction. The annuitant spouse owns the assets and will ultimately take withdrawals. This split is the engine of the strategy: high-income spouse gets the deduction now; later, income can be taxed to the lower-income spouse.

The 3-year attribution rule

Withdrawals from a spousal RRSP may be taxed back to the contributor if they occur within the attribution window. The clock covers the year of contribution and the two following calendar years. After that period, withdrawals are taxed to the annuitant. For example, a contribution made in 2025 can lead to attribution on withdrawals in 2025, 2026, or 2027. Wait until 2028 or later to have withdrawals taxed to the annuitant (assuming no new contributions restart the clock).

Why spousal RRSPs can lower family taxes

Canada’s tax system is progressive. If one spouse retires with significantly higher registered income than the other, the household’s combined tax can be higher than necessary. With a spousal RRSP, you aim for more equal RRIF withdrawals in retirement, potentially lowering the total tax bill and even reducing exposure to Old Age Security (OAS) clawbacks at high income levels.

Coordination with RRIF conversions

At the end of the year you turn 71, RRSPs (including spousal RRSPs) must be converted to a RRIF or an annuity. Minimum RRIF withdrawals then begin the following year and are reported as income by the account owner. This is where the earlier planning pays off: when each spouse has similar RRIF balances, the mandatory income stream is better balanced for tax purposes.

Scenario walkthroughs

• One-earner household: The high earner contributes to a spousal RRSP for the stay-at-home spouse for many years. In retirement, the annuitant spouse withdraws from their RRIF, absorbing income at a lower bracket. The contributor’s RRIF can then be smaller, reducing the risk of OAS clawback.
• Late-career shift: If the high-income spouse expects a huge income year (bonus, sale of a business), front-loading a spousal RRSP can harvest a large deduction. Plan withdrawals for after the attribution window, or keep the account untouched until RRIF age.
• Uneven pensions: If one spouse has a defined benefit pension, spousal RRSPs can help the other spouse build a larger RRIF to match the pension income stream.

Practical tips

• Separate accounts: Keep a dedicated spousal RRSP so attribution tracking is clean. New contributions to any spousal RRSP restart the clock.
• Watch the timeline: If you may need cash, avoid contributions that would force a withdrawal inside the attribution period.
• Maximize overall room: Spousal RRSP contributions reduce the contributor’s room, not the annuitant’s. The annuitant can still build TFSA room independently.
• RRSP vs. TFSA: For couples in low current tax brackets, funding TFSAs first can be wise. When brackets rise, shift to spousal RRSPs to capture bigger deductions.

Separation, divorce, and beneficiary choices

In the event of relationship breakdown, registered assets are often equalized under provincial family property laws. Transfers between RRSPs can occur on a tax-deferred basis when done under a formal separation agreement. For estate planning, name beneficiaries carefully. A spouse beneficiary can often allow direct transfer to a RRIF, preserving tax deferral. Review designations after life events to ensure they still reflect your wishes.

Interactions with the pension income credit and splitting

At or after age 65, certain RRIF income qualifies for the pension income amount and may be eligible for pension income splitting on the tax return. Spousal RRSPs help build the underlying RRIF balances, after which you may still use pension income splitting. These tools are complementary—start with account design during accumulation, then refine with tax return elections in retirement.

Common pitfalls

• Forgetting attribution: Withdrawing too soon after contributing leads to income being taxed back to the contributor. Mark your calendar.
• Mixing accounts: Commingling spousal contributions and regular contributions in the same RRSP muddies the attribution record. Keep them separate when possible.
• Over-contributing: The contributor’s room still applies. Confirm room in CRA My Account before making large spousal contributions.

Spousal RRSPs are powerful but must be tailored to your household’s income path. The above is education, not advice. Confirm details with a qualified professional.