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Spousal RRSP: How it works, benefits, and tax-saving strategies for couples

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Colin Graves

By Colin Graves

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Updated: November 06, 2024

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What is a spousal RRSP?

A spousal Registered Retirement Savings Plan (RRSP) is a retirement savings plan where one spouse acts as the plan annuitant and the other spouse is the plan contributor. It provides a way for married couples and common-law partners to split their retirement income and save on taxes.

The annuitant, or non-contributor, is responsible for making investment decisions and withdrawals, while the contributing spouse can claim the tax deduction on plan contributions.

How a spousal RRSP provides income-splitting benefits:

Spousal RRSPs are most beneficial when the contributing spouse expects to have a significantly higher retirement income than their partner. During the couple’s working years, the contributor benefits from the annual tax deduction on contributions.

After retirement, plan withdrawals are considered income for the annuitant.

Assuming the annuitant is in a lower tax bracket than the contributing spouse, the money will be taxed at a lower rate, resulting in tax savings for the couple. This is why the higher-income spouse is typically the contributor, and the lower-income spouse is typically the annuitant.

How does a spousal RRSP work?

  • Roles of contributor and annuitant: The contributing spouse receives tax deductions for contributions made to the plan and is responsible for ensuring they remain within annual and lifetime contribution limits. The annuitant is responsible for making the investment decisions and any withdrawals. 
  • Contribution limits: For 2024, the annual RRSP contribution limit is 18% of your earned income for the previous year, or $31,560, whichever is lower. The contributing spouse can split their contributions between a personal and spousal RRSP plan, but their total contributions must not exceed these limits, unless they have unused contribution room from previous years. 
  • Tax deduction and benefits: The contributing spouse can claim their spousal RRSP contributions, including any unused contributions, as a tax deduction. This reduces their taxable income by the amount of the deduction, which helps to save money on taxes. 

Where to find your RRSP limits

You can find information about your RRSP limits, including contribution room and deductions, on your annual Notice of Assessment, which the CRA sends shortly after your tax return has been processed, or via CRA My Account online.

Spousal RRSP Contributions, withdrawals and attribution rules

  • Spousal RRSP contribution rules

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    The main difference between a spousal and personal RRSP is that, with the former, the annuitant is not the plan contributor. The contributing spouse can split their contributions between a personal and spousal RRSP plan, but their total contributions must not exceed their overall limit. Some institutions, like RBC, allow both spouses to contribute to the same spousal RRSP plan, but you can only deduct amounts that were contributed in your name.

    Withdrawals from a spousal RRSP are claimed as income by the annuitant, unless the attribution rule applies. Another unique feature of spousal RRSPs is that contributions can be based on the younger spouse’s birthdate. So, even if the contributing spouse is over 71, they can still make RRSP contributions until the younger spouse turns 71. That flexibility doesn’t exist within a personal RRSP.

  • Withdrawal rules and timing

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    If spousal RRSP withdrawals are made outside the attribution period (see below), they are considered income for the annuitant.

  • Three-year attribution rule

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    If the annuitant withdraws money within three years of a contribution being made by their spouse, some or all of the funds may be taxed in the hands of the contributing spouse, not the annuitant. For example, if Sarah contributes $2,000 each year for three years, and her husband John withdraws $6,000 in year three, the full amount will be attributed to Sarah. If John withdraws $10,000, the additional $4,000 would be attributed to John.

    Note: The three-year attribution rule doesn’t apply in the following instances: Home Buyers Plan (HBP) and Lifelong Learning Plan (LLP) withdrawals, if the contributor dies and spousal withdrawals made after the relationship has ended.

Disadvantages of spousal RRSPs and key considerations

  • ⚠️ Attribution rule risks: If you don’t plan your spousal RRSP withdrawals carefully, attribution rules could result in the higher-income spouse having to claim the withdrawal as taxable income, wiping out any benefit from the earlier tax deduction. 
  • ❌ Limitations on contributions: Spousal RRSP contributions cannot exceed the contributor’s total RRSP contribution limit. You can contribute to more than one RRSP plan, but you must ensure that all contributions remain within your overall limit. 
  • 🧐 Consideration of other options: Spousal RRSPs are not a suitable retirement strategy for all couples. For example, if you and your spouse will have a similar income in retirement, you likely won’t benefit from the potential tax savings spousal RRSPs offer. The good news is, there are options, beyond contributing to an individual RRSP plan. If you have access to a savings program through your employer, you’ll want to take advantage of it, especially if your employer offers matching contributions. You can also use your Tax-Free Savings Account (TFSA) contribution room to boost your retirement savings. TFSA contributions are not tax deductible, but withdrawals are tax-free.

Alternatives to spousal RRSPs

  • Individual RRSPs

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    If you don’t have a spouse or common-law partner, you can still contribute to a personal RRSP plan. You’ll have access to the same contribution limits and investment options as you would with a spousal RRSP.

    Related reads: Best RRSPs in Canada

  • Questrade spousal RRSP account

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    Most Canadian financial institutions offer spousal RRSPs. This includes online brokerages, such as TD Direct Investing, Scotia iTrade or Questrade. While there are plenty of options, we like Questrade for its low fees. Unlike other providers, it does not charge an account fee on its spousal RRSP plan, and it offers free ETF purchases. You can choose from a wide variety of investments, including stocks, bonds, GICs and managed portfolios.

  • Registered Retirement Income Fund (RRIF) and rollover options

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    Spousal RRSPs can offer more flexibility than individual plans when it comes to rolling over your retirement savings into a Registered Retirement Income Fund (RRIF) account. A RRIF is a tax-sheltered investment designed to payout income in retirement. You cannot make contributions to a RRIF account.

    With an individual RRSP, you must convert to a RRIF by December 31 of the year you turn 71. But with a spousal RRSP, you can delay the rollover until the year your spouse turns 71, if they are younger than you. You can also continue contributing to a spousal RRSP until your spouse has turned 71, even if you are older.

Colin Graves Freelance Writer

Colin Graves is a Winnipeg-based financial writer and editor whose work has been featured in publications such as Time, MoneySense, MapleMoney, Retire Happy, The College Investor, and more. Before becoming a full-time writer, Colin was a bank manager for over 15 years.

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