Contact: Judy Culford

January, 1997

Phone: (519) 663-2252

Most Making Wrong Spousal RRSP Decision

When Canadians make their RRSP contribution this year, most will put it in the wrong person's name, unnecessarily increasing their tax due later.

"When it comes to spousal RRSPs, about 80% of Canadians make the wrong decision," says Talbot Stevens, financial educator, speaker and author of Financial Freedom Without Sacrifice. "Worse than that, once the decision is made, you can't fix it. Fortunately, with a basic understanding of spousal RRSPs, it is easy to put the money in the right spouse's name."

Spousal RRSPs are one of the last simple income-splitting opportunities available for couples, either legally married or living common-law. The purpose is to try to balance incomes when the money is going to be withdrawn from the RRSP, so the couple as a whole pays less tax. Two $30,000 incomes are taxed much less than one income of $60,000.

Stevens uses this example to illustrate. Consider Sue, a self-employed computer consultant who earned $100,000 in her first year, who is married to Tom, a teacher who makes $50,000 a year. Who, if either of these two, should contribute to a spousal RRSP?

Stevens says that most people think that Sue with the higher income should. But what retirement income does self-employed Sue have? None. While the teacher has a lower current income, he has a much higher retirement income because of a good, indexed pension.

"The critical point is to use a spousal RRSP to try to balance retirement income from all sources," explains Stevens. "In this example, about 80% of Canadians make the wrong spousal RRSP decision, which actually increases Tom's retirement income, making the problem worse."

It may be necessary to get the help of a financial advisor to estimate your retirement income from all sources. However, it is critical to get it right the first time because, once it's done, you can't change it.

Since most couples don't have perfectly balanced retirement incomes, almost every couple should use a spousal RRSP to properly balance retirement incomes to reduce their tax due then.

"The correct spousal RRSP decision won't make any difference in your tax refund now," Stevens emphasizes, "but it will make a huge difference in the amount of tax you pay at retirement."

Talbot Stevens is a financial educator, speaker and author of Financial Freedom Without Sacrifice. President of a London-based financial education firm, he has started a petition to make basic financial education a mandatory part of the school system.

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Talbot Stevens is a financial educator, industry consultant, and author of "Financial Freedom Without Sacrifice" and "Dispelling the Myths of Borrowing to Invest". For other story ideas, visit the Free Resources menu of For more information, contact Judy Culford, Communications Director for Talbot Stevens, by calling (519) 663-2252, or emailing