RETIREMENT PLANNING

For couples planning their retirement savings, a spousal RRSP can be a powerful tool. Unlike a standard Registered Retirement Savings Plan (RRSP), contributions are made by one spouse into an RRSP in the name of the other spouse or common-law partner, offering unique tax planning opportunities.

The primary advantage of a spousal RRSP lies in income splitting: the contributing spouse claims the tax deduction, while withdrawals are taxed in the hands of the lower-income spouse, potentially reducing the couple’s overall income tax burden. This strategy can be particularly effective for couples where one partner expects a lower retirement income, allowing them to take advantage of a lower tax bracket in the future.

In 2026, updated contribution limits, tax rules, and Canada Revenue Agency (CRA) guidelines make understanding how to properly use a spousal RRSP even more critical. Beyond tax savings, spousal plans provide flexibility in retirement planning, enabling couples to manage RRSP withdrawals, Registered Retirement Income Funds (RRIFs), and other registered accounts strategically.

Learn how Spousal RRSPs can optimize your tax savings and help secure a balanced, tax-efficient retirement.

Note: This content is provided for general information only and is not professional tax advice. Your personal situation may differ based on factors such as income, RRSP room, and retirement goals. Always consult a qualified tax professional before making contribution or withdrawal decisions. Use CRA My Account and your Notice of Assessment to regularly track your spousal RRSP contributions and ensure you remain within your allowable limits. Proper planning helps you maximize tax-deferred growth and avoid penalties or over-contributions.

What is a Spousal RRSP 2026?

A Spousal RRSP is a type of RRSP designed to help couples optimize their tax savings and manage retirement income more efficiently. In a spousal RRSP, one spouse (the contributing spouse) makes RRSP contributions into an account registered in the name of the other spouse or common-law partner. The receiving spouse is the account holder and can eventually make RRSP withdrawals, but it is the contributing spouse who claims the tax deduction on their income tax return.

The main advantage of a spousal RRSP is income splitting. By allocating contributions to the spouse who expects a lower retirement income, couples can reduce their combined taxable income in retirement, potentially avoiding higher marginal tax rates. Contributions grow on a tax-deferred basis, just like a regular RRSP, allowing the account to accumulate investment income through mutual funds, guaranteed investment certificates (GICs), exchange-traded funds (ETFs), or other qualified investments without immediate taxation.

Unlike a traditional RRSP, a spousal plan allows couples to strategically balance retirement income, manage RRSP withdrawals, and coordinate with other accounts such as Registered Retirement Income Funds, Tax-Free Savings Accounts (TFSAs), or Registered Education Savings Plans (RESPs) for future planning. Both partners benefit: the contributing spouse reduces their taxable income today, and the receiving spouse gains access to tax-deferred retirement savings in the future.

The Key Benefits of Contributing to Your Spouse’s RRSPs in 2026

A Spousal RRSP 2026 offers multiple advantages for couples aiming to maximize retirement savings and reduce their taxable income.

1. Tax-Deferred Growth

• Contributions grow tax-deferred, meaning investment income, interest, dividends, and capital gains compound without being taxed immediately.
• Helps your retirement savings grow faster compared to a taxable account.

2. Income Splitting

• Allows couples to shift potential retirement income from a higher-income spouse to a lower-income spouse.
• Reduces the overall household tax burden by taking advantage of a lower marginal tax rate on withdrawals.
• This can be particularly effective when one partner expects a smaller retirement income.

3. Flexibility Across Ages

• Contributions to a spousal RRSP can continue even as the receiving spouse nears age 71.
• The contributing spouse must stay within their RRSP deduction limit, giving more time to grow retirement savings.

4. Ideal for Couples with Different Incomes

• Higher-income spouse gets a tax deduction today.
• Lower-income spouse gains access to tax-deferred savings and potentially lower taxable income in retirement.

In 2026, with updated contribution limits and CRA rules, a spousal RRSP remains a highly effective tool for tax planning and retirement optimization.

How Spousal RRSP Contributions Work

A spousal RRSP allows one spouse or common-law partner to make contributions into an RRSP registered in the other spouse’s name. Understanding how contributions work is key to maximizing tax savings and avoiding overcontributions.

Contribution Limits

• The contributing spouse uses their own RRSP contribution room, not the receiving spouse’s.
• Contribution limits are determined by the RRSP deduction limit reported on the previous year’s Notice of Assessment and any carry-forward amounts from prior years.
• A common strategy among couples involves balancing contributions: the higher-income spouse may allocate a larger contribution to a spousal RRSP, while the lower-income spouse may contribute to their personal RRSP, potentially maximizing the overall tax deductions achieved.

Tax Deduction

• The contributing spouse claims the tax deduction for their contributions on their income tax return, reducing taxable income in the current year.
• This allows high-income earners to benefit immediately from tax savings, while the funds grow on a tax-deferred basis in the receiving spouse’s RRSP.

Example

Consider a couple where one spouse earns $120,000 per year and the other earns $40,000. By contributing $10,000 to a spousal RRSP 2026, the high-income spouse reduces their taxable income, potentially saving several thousand dollars in income tax. Later, when the lower-income spouse withdraws the funds in retirement, the withdrawals may be taxed at a lower marginal rate, effectively splitting retirement income and reducing the couple’s combined tax burden.

Strategic Planning

• Track contributions carefully to avoid exceeding the contributing spouse’s RRSP room.
• Remember the three-year attribution rule: withdrawals made within three years of a spousal contribution may be taxed in the hands of the contributing spouse.

Understanding Spousal RRSP Withdrawals

A key feature of a Spousal RRSP 2026 is how withdrawals are treated for tax purposes. Understanding the rules ensures couples can minimize taxes and take full advantage of income-splitting opportunities.

Who Can Withdraw (Spouse or Common Law Partner)

The annuitant, or the spouse in whose name the RRSP is registered, is the one authorized to withdraw funds. Contributions are made by the other spouse, but the receiving spouse controls investment decisions and withdrawals.

Canada Revenue Agency Tax Consequences

• Normal withdrawals: When the annuitant withdraws funds, the amount is generally taxable in their hands.
• Income-splitting benefit: If the annuitant is in a lower tax bracket than the contributing spouse, withdrawals may be taxed at a lower marginal rate, reducing the couple’s combined taxable income.
• Withholding taxes: Financial institutions withhold a portion at the time of withdrawal, which is applied against the annuitant’s annual income tax.

The Three-Year Attribution Rule

• Withdrawals made within three calendar years of the last contribution by the contributing spouse are attributed back to the contributor for tax purposes.
• This means that early withdrawals could result in the higher-income spouse being taxed, reducing the intended tax benefits.

Example

Consider a couple where the contributing spouse earns $120,000 and the annuitant earns $40,000. A $10,000 withdrawal taken four years after the last contribution is taxed in the annuitant’s hands at their lower rate, maximizing tax savings. Had the same withdrawal occurred within three years, the contributing spouse would be taxed at their higher rate, negating the income-splitting advantage.

Planning Tips

• Monitor contributions and withdrawals carefully to avoid the three-year attribution trap.
• Coordinate withdrawals with other income sources to optimize marginal tax rates.
• Consider combining Spousal RRSP withdrawals with other accounts like TFSAs or RRIFs for flexible retirement income planning.

How Spousal RRSPs Fit into Retirement Planning

A spousal RRSP 2026 is not just a tax-saving tool; it’s a strategic vehicle for long-term retirement planning. By carefully managing contributions and withdrawals, couples can balance income, reduce household taxable income, and ensure both partners enjoy a stable retirement income.

Strategic Use for Retirement Planning

• The higher-income spouse contributes to the spousal RRSP, claiming the tax deduction today.
• The lower-income spouse holds the account, allowing future withdrawals to be taxed at their lower marginal rate.
• Over time, this strategy smooths out retirement income, preventing one spouse from entering a higher tax bracket due to concentrated RRSP withdrawals.

Maximizing Tax Efficiency with Income Splitting

• Income splitting via a spousal RRSP reduces the couple’s combined income tax in retirement.
• Coordinating withdrawals with other registered accounts, like TFSAs, RRIFs, or deferred profit-sharing plans, can further optimize tax-deferred growth and minimize withholding taxes.
• Couples can plan staged withdrawals to take advantage of lower income years, retirement income gaps, or early RRSP liquidation for major expenses.

Example

Consider a couple where one spouse expects $100,000 annually from a pension and RRIFs, while the other expects $40,000. By contributing $15,000 annually to a spousal RRSP, the high-income spouse reduces their current taxable income, while the lower-income spouse can withdraw funds later, taxed at a lower rate, effectively splitting income and lowering the household tax burden in retirement.

Investment Options in a Spousal RRSP

A spousal RRSP 2026 offers the same investment flexibility as a regular RRSP, allowing couples to grow their retirement savings in a tax-deferred account. Choosing the right investments and asset allocation can have a significant impact on long-term growth and tax efficiency.

Eligible Investments (Mutual Funds, ETFs & More)

Spousal RRSPs can hold a wide range of qualified investments, including:

• Stocks: Individual equities that can provide capital gains and dividends.
• Bonds: Fixed-income investments offering steady interest income.
• Mutual funds: Professionally managed portfolios combining stocks and bonds.
• Exchange-Traded Funds (ETFs): Low-cost, diversified investment options traded like stocks.
• Guaranteed Investment Certificates (GICs): Low-risk, fixed-return investments.
• Other qualified investments: Depending on your financial institution, this may include group RRSPs or self-directed RRSPs.

Building a Diversified Portfolio

• Diversification helps reduce risk while optimizing long-term returns.
• Combine equities for growth with fixed-income investments for stability.
• The inclusion of international exposure through ETFs or mutual funds is a common method for diversifying market risk.
• Regularly review and rebalance the portfolio to maintain alignment with retirement goals.

By carefully selecting eligible investments and tailoring asset allocation to your risk profile and retirement timeline, a spousal RRSP can be a powerful tool for building a tax-efficient retirement portfolio.

Important Considerations Before Opening a Spousal RRSP

Opening a spousal RRSP can be a highly effective strategy for couples, but careful planning is essential to maximize tax benefits and avoid penalties.

Check Contribution Limits

• Contributions to a spousal RRSP use the contributing spouse’s RRSP room, not the annuitant’s.
• Ensure the total RRSP contributions for the year, combined with any contributions to your own RRSP, do not exceed your annual deduction limit.
• Keep track of carry-forward amounts from previous years to make the most of unused contribution room.

Direct Transfers and Avoiding Penalties

• Moving funds between financial institutions via a direct transfer helps avoid triggering taxable withdrawals.
• Incorrect or in-kind transfers could result in excess contributions or penalty taxes if the total contributions exceed available room.
• Always verify that your financial institution applies contributions correctly to the intended account.

Track Contribution Room Regularly

• Use CRA My Account or your Notice of Assessment to monitor available RRSP room and ensure you don’t exceed limits.
• Consider setting up alerts or automated contributions to maintain consistent funding without overcontributing.
• Regular tracking helps avoid last-minute errors near the RRSP contribution deadline.

By taking these steps, couples can confidently open and contribute to a spousal RRSP, taking full advantage of tax-deferred growth, income-splitting opportunities, and a more balanced retirement income.

Take Action on Your Retirement Savings

Ready to start saving for retirement together? A spousal RRSP 2026 can help you maximize tax savings, build a balanced retirement income, and take full advantage of income-splitting opportunities. Open an RRSP today with Questrade and begin contributing strategically for both you and your spouse or common-law partner.

Quick Actions

• Open a Spousal RRSP: Start contributing for a tax-efficient retirement.
• Consult with a tax advisor: Get personalized guidance for your situation.
• Track your contributions: Monitor your RRSP room to avoid excess contributions and optimize your strategy.