What the heck is a Spousal RRSP? TFSA & RRSP 101.
Which plan should I contribute to first – RRSP or TFSA?
As a general rule, RRSPs are a good choice for longer-term goals such as retirement, while TFSAs work better for more immediate objectives, such as a home down payment. But because of its tax advantages, TFSAs should not be overlooked as a retirement savings vehicle. If you expect to be in a higher marginal tax rate in the future, it may be a good strategy to contribute to a TFSA now, when you’re paying less income tax and an RRSP later, when you’ll be subject to a higher marginal tax rate and your RRSP contribution will generate more income tax savings. Your financial security advisor can work with you to help determine an approach that suits your situation best.
Where can I find my RRSP and TFSA contribution information?
Your RRSP deduction limit can be found on your notice of (re)assessment from Canada Revenue Agency/Revenu Québec. Your current year’s limit will appear on your notice from the previous year. Your TFSA contribution limit can be obtained by phone via the Tax Information Phone Service (TIPS) at 1-800-267-6999 or online via the Canada Revenue Agency My Account feature (https://www.cra-arc.gc.ca/myaccount/).
What is a spousal RRSP and should I take advantage of it?
In a spousal RRSP, the higher income spouse makes an RRSP contribution and claims the tax deduction but the other spouse owns the plan and the money within it. Spousal RRSPs are generally used to equalize income during retirement and, therefore, reduce the overall family tax rate. This is most powerful if one spouse earns significantly more income than the other. Any contributions made by the higher income spouse will reduce their individual RRSP deduction limit for the year, but won’t affect how much the lower income spouse can contribute to their individual RRSP. If money is withdrawn within three years of a contribution to the spousal RRSP, all or part of this amount will be taxed as income to the spouse who made the contribution. Your financial security advisor can address how a spousal RRSP can impact your individual RRSP contributions.