Alright, today I'm going to talk to a
specific group of individuals. Today I'm
going to talk to married or common-law
couples where one of the spouses has a
higher income than the other one, so please,
if you know anybody like this that you
think could benefit from this
information please share with them.
If you're single
don't worry about listening to this
video, but if you are single before you
go, I just want to remind you of one thing
really, really quick.
Valentine's Day is coming up in a couple
weeks and you're alone. See ya.
So, the spousal RRSP is a tax planning tool for
couples that used to be more beneficial
than it is today, because years ago it
was really important for couples to
build sort of equal retirement accounts
so that they could pull it out in
retirement. But now you're allowed to
split your retirement income in
retirement, so it doesn't really matter
who has the money.
However there are still some benefits
to Spousal RRSPs. I'm not going to
talk about all of them today, I'm just
going to talk about a real-world example
of one way that you might want to use it
for an immediate and a pretty substantial
benefit. So let's take a couple where
we've got a husband and he's making
$170,000 dollars a
year. He's in the 42% tax bracket
and his wife is working part-time while
she takes care of the kids and she's
making $40,000 dollars a year. They have
a great family income, she's used to
contributing their own RSP normally, so
they feel at this time of year that they
want to contribute. So they think
ok let's make it fair to put $10,000 into
mind as the husband and I'm going to get $4,200
dollars back and the wife is going to
put $10,000 dollars into her
RSP and she's only going to get
$2,500 dollars back.
That doesn't make sense because now
you're leaving $1,700 tax dollars on the
table that you could have got back if
you put all the money into his
RRSP, which is probably the best advice,
but a lot of couples don't want that. I
mean I've met with a lot of couples in
this situation where the husband or wife
that's making less says, "you know what, I
still want to have control over my own
account." And I kind of get that, but
I've also been in meetings where I've
got a wife say well I want my own RRSP,
because I want my money if we get
divorced. And I was sort of just like,
well this is awkward and then I was like,
imagine how awkward this is gonna be after I
leave. I don't think that you should be
planning your finances around your
divorce, unless you're Johnny Depp and two,
if you're thinking that way you're going
to get a half the money anyway, so don't
worry about it.
So there is another option where now
this husband can say okay I'm going to
put $10,000 dollars into my RSP, but
then I'm also going to open a spousal RRSP
for you and put $10,000
dollars into there. And then this does
two things; so that makes the
contribution work against his taxes, so
you get a full tax advantage of him
making a contribution, but now this
account is in the lower earning spouses
name. They have control over the
account. It is actually their account, so now
you've done that and that is a good use
of the Spousal RRSP if you're wasting or
leaving money on the table every year
because you're both contributing to your own
RRSPs. Don't do this
maybe, if you're planning on later maxing
both RRSPs, because this works
against the higher
earning income spouses RRSP room.
Well most people don't ever do that and
lastly, I would suggest that it's
probably not a terrible idea to try and
create similar sized retirement accounts,
because you never know in the future when we
retire, the government might not allow us
to split income in retirement anymore
and then you'll be better off at the end
of the day.
tThank you very much. Please share with
your friends again. See you next week