{"id":315136,"date":"2026-02-24T18:27:12","date_gmt":"2026-02-24T18:27:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/315136\/"},"modified":"2026-02-24T18:27:12","modified_gmt":"2026-02-24T18:27:12","slug":"how-spousal-rrsps-can-smooth-out-uneven-income-in-retirement","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/315136\/","title":{"rendered":"How spousal RRSPs can smooth out uneven income in retirement"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

Spousal RRSPs can be useful for higher earners to smooth out income when there\u2019s a serious mismatch in assets or investments.Edwin Tan\/iStockPhoto \/ Getty Images<\/p>\n

There\u2019s a perception that spousal registered retirement savings plans (RRSPs) have dwindled in importance over the years because of couples\u2019 ability to split up to 50 per cent of income from pensions and registered retirement income funds (RRIFs). <\/p>\n

However, spousal RRSPs can still be useful for higher earners when there\u2019s a serious mismatch in assets or investments and the income generated is claimable solely on one spouse\u2019s tax return. <\/p>\n

Here\u2019s an example of how that lopsided income can result in additional taxes paid.<\/p>\n

A husband and wife \u2013 let\u2019s call them Aravind and Mikayla \u2013 are both 65 years old in January, 2026, and have the following annual income that can be split:<\/p>\n

an RRSP totalling $1.5-million in Mikayla\u2019s name that she\u2019s converting to a RRIF, with a theoretical long-term annual withdrawal amount of $60,000 based on market assumptions and the RRIF minimum withdrawal of 4 per cent at the age of 65;maximum CPP for both her and Aravind of $1,507.65 monthly, for a total of $18,091.80 each a year; andmaximum OAS of $742.31 monthly for an annual total of $8,907.72 each.<\/p>\n

With the RRIF income split evenly ($30,000 each), this would result in Aravind and Mikayla each claiming a total income of $56,999.52 for taxes owing of $8,027 in Ontario. That leaves each of them with $48,972.52 of after-tax spending. (For simplicity, this calculation does not include additional credits to which they might be entitled.) <\/p>\n

But what if Mikayla had additional income of $60,000 that couldn\u2019t be split with Aravind? There are several reasons this could occur, including:<\/p>\n

payout to the owner of a corporation in which one spouse wasn\u2019t involved;rental properties held in one spouse\u2019s name;income out of a family trust that\u2019s payable to one spouse only;a retirement compensation arrangement that specifically doesn\u2019t allow income-splitting in retirement;income from non-registered investments held in one spouse\u2019s name; oran inheritance a spouse is protecting by keeping separate in the event of a divorce. <\/p>\n

Adding $60,000 of income to Mikayla\u2019s tax return results in a total income of $116,999.52<\/p>\n

That means her OAS is clawed back at a rate of 15 per cent on income above $95,323, for a reduction of $3,251.48.<\/p>\n

Her 2026 tax return would show the following:<\/p>\n

Total income: $116,999.52OAS clawback: $3,251.48 Net taxable income: $113,748.04 (OAS clawback functions as both a deduction on the tax return as well as an additional tax payable.)Taxes owed: $25,319, and the OAS clawback of $3,251.48After-tax income: $85,177.56 <\/p>\n

Combined with Aravind\u2019s income of $48,972.52, the couple\u2019s after-tax total is $134,150.08.<\/p>\n

The income mismatch means Mikayla has a lot of income taxed at higher rates, and her OAS is in clawback territory.<\/p>\n

Because the RRSP started in Mikayla\u2019s name, she can only split up to 50 per cent of the income from the converted RRIF with Aravind, or a maximum of $30,000.<\/p>\n

What if she had contributed to a spousal RRSP instead? <\/p>\n

Although there are other ways to reduce the impact of her additional income, those solutions often require additional planning or complexity. The spousal RRSP, on the other hand, is simple.<\/p>\n

Aravind would own the spousal RRSP and, at retirement, the income from minimum RRIF withdrawals would be his.<\/p>\n

That means Aravind and Mikayla each have their CPP, OAS and $60,000 of additional income for a total of $86,999.52.<\/p>\n

That will increase Aravind\u2019s taxes owing from $8,027 to $16,822. In return, Mikayla\u2019s taxes are reduced from $25,319 to $16,822 and her OAS isn\u2019t clawed back.<\/p>\n

The net result is an after-tax total of $140,355.04 after using a spousal RRSP \u2013 or $6,204.96 more than with the regular RRSP. <\/p>\n

While this amount alone is worth strategizing over, the real impact is in cases in which this mismatch in income and taxes will happen repeatedly. <\/p>\n

Being able to equalize this taxable income could result in hundreds of thousands of dollars of tax savings over an entire retirement \u2013 all by the perfectly simple solution of using a spousal RRSP.<\/p>\n

Aravind Sithamparapillai is a financial planner at Ironwood Wealth Management Group in Fonthill, Ont.<\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: Spousal RRSPs can be useful for higher earners to smooth out income when…\n","protected":false},"author":2,"featured_media":315137,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[1116,72,176,11575,61,60,19293,174,175],"class_list":["post-315136","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-appwebview","tag-business","tag-finance","tag-globe-advisor","tag-ie","tag-ireland","tag-noastack","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/315136","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=315136"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/315136\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/315137"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=315136"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=315136"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=315136"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}