Investing in Spousal RRSP Still a Good Idea

We asked in our October poll, “With the opportunity to use pension income splitting in the future to reduce taxes, is investing in a spousal RRSP still a good idea?”, and the clear answer was “yes”.

Of the 206 KBR voters, 92% feel that contributing to a spousal RRSP is a safer bet than counting on the opportunity of pension income splitting.

Gaetan states: “With any incoming or incumbent government having the power to rescind the income-splitting tax advantage, I would certainly recommend that clients still use the spousal RRSP to protect themselves against that possibility.”

Jacquelynne adds: “Allowing pension splitting is a fairly new concept. What happens if they eliminate the option and reverse the ability to pension split? When this retirement tsunami starts, they might just begin to realize the income that the government lost.”

Al laments that very few will be able to take advantage of pension income splitting: “Very sad when 2/3 to 3/4 of Canadians do not have a private pension and the government makes tax winners of those that are already fortunate enough to have a private pension…”

D Preston points out RRSPs benefit in early retirement: “Spousal RSPs are important if clients wish to retire prior to age 65. Splitting from a RRSP or RRIF is only allowed after that age…”

However, Roxanne cautions on RRSP investing: “Any income splitting opportunity should be taken. That said, if my clients are in the lowest tax bracket, I advise them not to make RRSP contributions. I don’t want them deducting at the lowest bracket early in their working career then pay in a higher bracket when they retire. TFSAs are a better choice in that scenario.”

Maureen opines: “Even though we may have retirement plans that exclude its usefulness, it takes no more time, trouble, risk, or personal resources to allocate a spousal portion to our annual RRSP contribution. Why not deal ourselves the best hand possible for future tax savings choices? Plans change, whether we like it or not.”

To sum it up, Michael writes: “There will always be a place for RRSPs ...you should keep them up ‘til retirement. Why?... it’s the safest way to save for the day.”

Knowledge Bureau thanks the 206 voters who participated in October’s poll. This month’s poll question is "It's Financial Literacy month: Putting focus on spending less than you earn is more important than earning more than you spend. Do you agree?"