At this time of year, I usually reserve a post to lament the term "RRSP season" and its origins, however I am going to skip right over that this year.
Instead, let's talk about the spousal RRSP, an effective tool in the right circumstances. Partners in relationships can utilize the spousal RRSP to even out retirement accounts while keeping contribution deductions in the hands of the higher income earner. Many couples however, forget that the benefits don't end there.
As we know, one must cease RRSP contributions at age 71, when it is time to convert to a RRIF. But what if you are still working and earning employment income? Can you keep contributing and getting that tax deduction?
The short answer is no, however..........if you have a spouse that is younger than you, and not yet 71, you can continue to make spousal RRSP contributions to their account. What would the benefits be?
1- continuing to deduct the contribution from your employment income.
2- investments can continue to compound tax free in the spousal RRSP until that annuitant has to begin RRIF payments.
Rare, I know....but it happens. If you find yourself in this camp, ask us how this might benefit you.