A Beginner's Guide to Investing (Part 9): RRSP Contributions and Spousal RRSPs

Spousal strategies and tax-smart withdrawals

In Part 7, we explored the fundamentals of RRSPs, including how RRSP contribution room is calculated. While the contribution room you receive is based on your previous year’s earned income, there is also a cut-off date for contributing to and keeping your RRSP.

RRSP Contribution Cut-Off Date

While there is no official retirement age in Canada, the RRSP has one — your RRSP has to retire by the end of the year you turn 71. In other words, you can no longer contribute to your own RRSP after December 31 of the year you turn 71. By that date, you must also close your RRSP by choosing one of the available options.

You generally have three options:

1. Convert your RRSP into a Registered Retirement Income Fund (RRIF).
2. Use the money to purchase an eligible annuity.
3. Withdraw the money as cash or transfer the assets into a non-registered account.

The third option can result in a large tax bill because the entire amount is generally added to your income for that year. For this reason, many people choose to convert their RRSP to a RRIF rather than withdraw the entire amount at once.

You can also use more than one option. For example, you could convert part of your RRSP to a RRIF, use another part to purchase an annuity and withdraw the remaining amount as cash.

You can also transfer investments such as stocks or ETFs directly from your RRSP to a non-registered account. However, this is still treated as an RRSP withdrawal for tax purposes. The fair market value of the investments on the date of the transfer is added to your taxable income.

Note: We will discuss RRIF and annuity in future articles. 

When you convert your RRSP into an RRIF or use it to purchase an eligible annuity, it does not trigger tax, and your financial institution does not withhold any tax. The transfer itself does not trigger tax, and the money continues to grow tax-deferred. You pay tax later when you withdraw money from the RRIF or receive payments from the annuity.

Note: Although no tax is withheld when you convert an RRSP to a RRIF or purchase an annuity, your financial institution may charge fees for the transaction.

While you can no longer contribute to your own RRSP after December 31 of the year you turn 71, what if you still have unused contribution room and a younger spouse?

Spousal RRSP

A Spousal RRSP is a special type of RRSP, primarily useful for helping couples build more balanced retirement savings. It can be particularly valuable when one spouse earns significantly more than the other. It can also allow you to contribute to an RRSP even after you have turned 71, provided you have unused RRSP contribution room and are contributing to a Spousal RRSP.

What is a Spousal RRSP?

A Spousal RRSP can be helpful for a couple with significantly different incomes during the working phase to reduce taxes during retirement. The advantage is amplified when one partner does not work at all.

In a nutshell, it allows one partner (spouse), who makes a higher income, to contribute to the lower-earning partner’s retirement savings. This results in shifting some or all of the retirement savings from the higher-earning partner to the lower-earning partner. 

How the Spousal RRSP Works

• The couple opens a Spousal RRSP account in the name of the lower-earning spouse, called the annuitant, commonly known as the account owner or the account holder.
• The higher-earning partner is called the contributor and contributes money to the Spousal RRSP.
• The contributor must have available RRSP contribution room to contribute to a Spousal RRSP. Contributions made by the higher-earning spouse use that spouse’s RRSP contribution room, not the contribution room of the spouse who owns the account. In other words, if the contributor does not have available RRSP contribution room, no contribution can be made to the Spousal RRSP, even if the annuitant has contribution room.
• The higher-earning partner gets the same tax savings by contributing to a Spousal RRSP as they would have received by contributing to their individual RRSP.
• The annuitant owns and controls the account and makes the investment decisions. A Spousal RRSP may be self-directed or managed by a financial institution or advisor. Once a contribution is made, the contributor has no legal control over the funds.
• Investment growth stays tax-deferred like a traditional individual RRSP.
• Like a regular RRSP, a Spousal RRSP must be converted to a RRIF or otherwise closed by the end of the year in which the annuitant turns 71. Until then, contributions can continue, regardless of the contributor’s age.
• Withdrawals from a Spousal RRSP are generally taxable to the spouse who owns the account. However, the three-calendar-year attribution rule may cause some or all of the withdrawal to be taxed to the contributing spouse instead. (See the 3 Calendar-Year Attribution Rule, which is explained later in this article.)

How a Spousal RRSP Can Save Taxes During Retirement

A Spousal RRSP does not provide extra tax savings when you contribute. The higher-earning spouse receives the same RRSP deduction whether the contribution goes into their own RRSP or into a Spousal RRSP. The lower-earning spouse does not receive a tax deduction for the contribution.

The potential tax benefit comes later, during retirement.

A Spousal RRSP allows some of the retirement savings to be built up in the lower-earning spouse’s name rather than entirely in the higher-earning spouse’s name. Since each spouse is taxed separately in Canada, this can help spread the couple’s retirement income more evenly between them.

If the higher-earning spouse does not use a Spousal RRSP, that spouse may end up with a much larger RRSP portfolio than the lower-earning spouse. When the money is eventually withdrawn during retirement, the spouse with the larger RRSP may have a much higher taxable income and may therefore pay more tax.

By building more evenly sized RRSP portfolios, the couple may be able to spread their retirement income more evenly and potentially reduce their combined tax bill.

Let’s look at an example.

John and Sara are a couple. John earns $120,000 a year, and Sara earns $60,000. Assume John has $21,600 of available RRSP contribution room and Sara has little or no money available to contribute to her own RRSP.

If John contributes the entire $21,600 each year to his own RRSP and does so for 35 years, assuming an average annual return of 6%, his RRSP could grow to approximately $2.48 million.

Now imagine the couple retires with John’s RRSP worth approximately $2.48 million and Sara has little or no RRSP savings of her own.

If John withdraws 4% of his RRSP each year, that would be about $99,200 of annual RRSP income. Once CPP, OAS and other income are added, John’s total taxable income could become quite high. Sara, on the other hand, would have much less taxable income.

Now consider a different approach.

Instead of putting the entire $21,600 into his own RRSP, John contributes $10,800 to his own RRSP and $10,800 to a Spousal RRSP in Sara’s name.

If both accounts earn the same 6% annual return for 35 years, each account would grow to approximately $1.24 million. The couple would still have the same total retirement savings of approximately $2.48 million. The difference is that the savings are now divided between the two spouses.

If each spouse withdraws 4% annually, each would receive approximately $49,600 from their RRSP or Spousal RRSP.

Instead of most of the RRSP income being reported by John, the retirement income is now spread between John and Sara. Because each spouse is taxed separately, this may result in a lower combined tax bill than having the entire RRSP in John’s name.

The table below illustrates the potential difference using Ontario’s 2026 tax rates, assuming they are 65 or older — taxes may be slightly higher if one or both are under 65.

The key point is that the Spousal RRSP does not create more retirement savings. In this example, the couple has approximately the same $2.48 million under either approach. The potential benefit comes from who reports the retirement income.

You must keep one important rule in mind when withdrawing money from the Spousal RRSP. If the contributing spouse has made contributions to a Spousal RRSP in the year of a withdrawal or either of the two preceding calendar years, some or all of the withdrawal may be attributed back to the contributing spouse for tax purposes.

This is commonly called the three-calendar-year attribution rule. We will look at this rule in more detail below.

3-Calendar-Year Attribution Rule

There is an important rule to understand when using a Spousal RRSP. If the spouse who owns the Spousal RRSP withdraws money in the year a contribution was made, or in either of the following two calendar years, the withdrawal may be included in the contributing spouse’s taxable income rather than the owner’s.

For example, suppose John contributes $10,000 to Sara’s Spousal RRSP in 2026. If Sara withdraws money from the Spousal RRSP during 2026, 2027 or 2028, the withdrawal may be attributed to John for tax purposes. Starting January 1, 2029, withdrawals would generally be taxed in Sara’s hands instead.

This is a three-calendar-year rule, not a 36-month rule — the exact date of the contribution does not matter. For example, a contribution made in December 2026 and a contribution made in January 2026 are both subject to the same calendar-year rule.

There is another important point: making a new contribution can restart the three-calendar-year period. Therefore, if John contributes to Sara’s Spousal RRSP in 2026 and then makes another contribution in 2027, the relevant waiting period extends based on the 2027 contribution.

Also, opening multiple Spousal RRSP accounts does not allow couples to avoid this rule. The attribution rules apply to contributions made by the contributor to Spousal RRSPs for the same spouse, even if the contributions are held in different accounts.

Exceptions to the 3-Calendar-Year Attribution Rule

There are some exceptions to the 3-calendar-year attribution rule. The most important ones include:

• Spousal RRIF minimum withdrawals: Once a Spousal RRSP has been converted to a RRIF, the attribution rule does not apply to the minimum annual RRIF withdrawal. However, amounts withdrawn above the minimum may still be subject to the attribution rule. (We will discuss RRIF in a future article.)
• Death or relationship breakdown: The attribution rule generally does not apply following the death of either spouse or the breakdown of the marriage or common-law relationship.
• Home Buyers’ Plan (HBP) and Lifelong Learning Plan (LLP): Withdrawals made under these programs are generally not subject to the attribution rule.

Tip: If you plan to use a Spousal RRSP in retirement, consider making your final contribution three calendar years before you plan to start withdrawals. This allows the attribution period to expire and can help ensure that future withdrawals are taxed in the lower-earning spouse’s hands.

Other Potential Benefits of a Spousal RRSP

Besides helping couples balance their retirement savings and potentially reduce taxes in retirement, a Spousal RRSP can provide a few other benefits.

Help Reduce OAS Clawback

A Spousal RRSP can help reduce or avoid the OAS clawback in retirement by allowing a couple to build more balanced retirement income.

For example, if one spouse has a much larger RRSP or RRIF than the other, that spouse may eventually have significantly higher taxable income. This could result in some of their OAS being clawed back. Building retirement savings in a Spousal RRSP can help distribute future RRSP or RRIF income more evenly between the spouses.

The actual benefit will depend on the couple’s overall income and retirement-income strategy. A Spousal RRSP does not automatically eliminate OAS clawback.

Provide Additional Home Buyers’ Plan Flexibility

A Spousal RRSP can also provide another source of funds under the Home Buyers’ Plan (HBP). This can be particularly useful for couples where one spouse has significant RRSP savings while the other has little or no individual RRSP.

If the annuitant spouse meets the HBP eligibility requirements, they may be able to withdraw up to $60,000 from their Spousal RRSP under the HBP, even if they do not have an individual RRSP of their own. Combined with up to $60,000 that the higher-earning spouse can withdraw from their own RRSP, the couple could potentially have up to $120,000 available for a down payment.

Another Retirement Planning Opportunity

A Spousal RRSP can also be useful when a couple enters retirement before age 65. It can provide an opportunity to withdraw retirement savings from the Spousal RRSP while potentially keeping the couple’s overall taxes lower. I discuss this strategy in detail in a separate article.

These are additional benefits rather than the primary purpose of a Spousal RRSP, but they can be valuable depending on your circumstances.

Moving from RRSP to RRIF

An RRSP is designed primarily for building retirement savings. When you retire and begin drawing from those savings, you may choose to convert your RRSP to a Registered Retirement Income Fund (RRIF) and use it to provide retirement income. In the next article, I explain how RRIFs work, when you might consider converting an RRSP to a RRIF, how minimum withdrawals are calculated and how RRIF withdrawals are taxed.

Read Next: Part 10: Registered Retirement Income Fund (coming soon)

Disclaimer: This article is for educational purposes only and is not financial or tax advice. Please consult a qualified tax or financial professional before making any decisions.