Episode #20 - Two Minutes to a Better RSP: The Benefits of Spousal RSPs
Announcer: Welcome to The Money Clip podcast series from The Vault, Scotiabank’s online guide to helping Canadians get ahead financially. Listen in to gain a deeper understanding of your personal finances and find out how a few small changes to the way you manage your money can make a big difference.Michael Seaton: Thank you for joining us on The Money Clip podcast series from Scotiabank. I’m your host, Michael Seaton, and with The Money Clip we provide Canadians with a deeper understanding of personal finance and money-related matters. This is our series titled “Two Minutes to a Better RSP”. We hope to put you on the path to maximize your retirement savings plan as the deadline approaches. This is episode fourteen in the series, and today our subject is spousal RSPs. A spousal RSP has long been one of the more attractive income splitting opportunities available to Canadians. Recent government proposals that would allow pension splitting between spouses have taken some of the focus off of spousal RSPs. But even if those pension splitting proposals pass, splitting income through spousal RSPs can be an effective way for a couple to ease their overall tax burden. That’s because one large income is taxed at a higher rate than two smaller incomes of the same value. So here’s how a spousal RSP works: The higher income spouse contributes to a spousal RSP subject to his or her available contribution room and gets the tax deduction to lowering the higher taxable income. However, the spousal RSP belongs to the lower income spouse and, over time, the higher income spouse can build up the RSP of the lower income spouse. The goal here is to bring the couple’s retirement incomes closer together, and so to save overall on their combined tax bill. The larger the projected income gap between the spouses at retirement, the bigger the potential tax savings. As with any strategy, it’s a good idea to speak with your financial advisor to find out what is best for your particular situation.
This has been another Two Minutes to a Better RSP podcast. Keep listening for more in this series as we take two minutes to review tips and suggestions to reach your retirement goals. Thanks for listening.
Announcer: Do you have any thoughts on today’s show? We’d love for you to get involved and become part of the conversation. Send us your questions, comments or money management tips so that we can address them in future podcasts. Our email address is themoneyclip@scotiabank.com and our call-in number is 1-866-652-5333. The Money Clip is brought to you by The Vault at Scotiabank. Be sure to tune in again next time.