Posted on: 24-10-10 22:39:15
Hello all,
I do get my RRSPs deducted from my salary monthly (my employer matches my contributions to 50 % so that works well for me).
I am now willing to contribute to spousal RRSP, as my wife is not working, and if we need, she can withdraw money off her RRSP due to being unemployed without being heavily taxed.
Is there a way that i still get my RRSP deducted from my payroll as usual and then transfer is to my spousal RRSP, I am sorry if this question sounds funny to guru's - I am quite new to all this and am wanting to know if there is any way to do it where i dont loose my employer contributions.
If somehow - this can be made to work, would i still get the tax deductions the same way? please share.
Thank You
Cougar, be careful with spousal RRSPs in your situation.
Your spouse cannot withdraw from your spousal for at least 2 calendar years from the date of last contribution.
Which means if you set up automatic payroll contributions into that plan, it becomes a sliding window and she won't be able to withdraw from it until 2 years after you stop the contributions.
Also, since it counts as income for her, she may lose her eligibility for EI and you will lose the spouse/dependent credit on your income tax return.
You will also lose the equivalent contribution room forever.
Finally, because of income splitting rules since the 2009 budget, spousal RRSP have become rather meaningless from retirement planning purposes.
If you are trying to do pre-retirement income splitting, consider other means such as a spousal investment loan.
P.S. you should change your ID. I assumed you were a woman until I re-read your post and realized you are talking about your wife 
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
Quote:
Originally posted by pratickm
Cougar, be careful with spousal RRSPs in your situation.
Your spouse cannot withdraw from your spousal for at least 2 calendar years from the date of last contribution.
Which means if you set up automatic payroll contributions into that plan, it becomes a sliding window and she won't be able to withdraw from it until 2 years after you stop the contributions.
Also, since it counts as income for her, she may lose her eligibility for EI and you will lose the spouse/dependent credit on your income tax return.
You will also lose the equivalent contribution room forever.
Finally, because of income splitting rules since the 2009 budget, spousal RRSP have become rather meaningless from retirement planning purposes.
If you are trying to do pre-retirement income splitting, consider other means such as a spousal investment loan.
P.S. you should change your ID. I assumed you were a woman until I re-read your post and realized you are talking about your wife
Oh. This is really good information PAtrickm - As always you are a fantastic contributor to this forum. I really would not have found out about all the stuff you mentioned. Appreciate it all - Much appreciated.
As for the ID, I even has a picture of a guy
lol to make it easier 
Me and my wife both have 10K RSP contribution room,
I went to the bank and asked to make spousal RSP contribution of 5K, but the bank lady said, I can not make spousal RSP contribution since my wife has her own RSP limit… Is it true that I can make spousal RSP only after my wife doesn't have any RSP room left?
I am also planning to withdraw 25K for each (me and my wife) under HBP.
Is it also possible for me to make contribution to spousal RRSP and then withdraw upto 25K (after 90 days) under HBP ?
Quote:I don't believe this is true.
Originally posted by jigz787
Is it true that I can make spousal RSP only after my wife doesn't have any RSP room left?
I've never heard this "rule" before.
I did a quick search to confirm and my bank's website states:
The total amount of your contributions to a spousal RRSP and your own RRSP can’t exceed your personal RRSP contribution limit for the year. This amount is shown on your Notice of Assessment from the Canada Revenue Agency. Any contributions you make have no effect on your spouse’s contribution limits.
For example, if you have $10,000 of RRSP contribution room and your spouse has $6,000, you can share your contribution any way you want between your RRSP and a spousal RRSP – as long as your total personal contribution and spousal contribution isn’t greater than $10,000. You could deposit the full $10,000 in a spousal RRSP, and your spouse could still deposit $6,000 into his or her own RRSP.
Quote:Yes, but it is a bad idea.
I am also planning to withdraw 25K for each (me and my wife) under HBP.
Is it also possible for me to make contribution to spousal RRSP and then withdraw upto 25K (after 90 days) under HBP ?
Very. Bad. Idea.
In 90 days, your money will experience almost no growth (unless you are speculating with the money).
You will also permanently lose the contribution room.
You will also be forced to pay that amount back into your RRSPs based on a fixed, mandatory schedule.
The tax deduction benefit, if any, will eventually be offset upon withdrawal and you lose the ability to take the deduction in later years when your money will have more time to grow in a tax-deferred manner.
If you plan to buy a house in 3 months, and have the money available now, keep it in a savings account for 3 months rather than play this game.
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
Quote:
Originally posted by pratickm
Quote:I don't believe this is true.
Originally posted by jigz787
Is it true that I can make spousal RSP only after my wife doesn't have any RSP room left?
I've never heard this "rule" before.
I did a quick search to confirm and my bank's website states:
The total amount of your contributions to a spousal RRSP and your own RRSP can’t exceed your personal RRSP contribution limit for the year. This amount is shown on your Notice of Assessment from the Canada Revenue Agency. Any contributions you make have no effect on your spouse’s contribution limits.
For example, if you have $10,000 of RRSP contribution room and your spouse has $6,000, you can share your contribution any way you want between your RRSP and a spousal RRSP – as long as your total personal contribution and spousal contribution isn’t greater than $10,000. You could deposit the full $10,000 in a spousal RRSP, and your spouse could still deposit $6,000 into his or her own RRSP.
Quote:Yes, but it is a bad idea.
I am also planning to withdraw 25K for each (me and my wife) under HBP.
Is it also possible for me to make contribution to spousal RRSP and then withdraw upto 25K (after 90 days) under HBP ?
Very. Bad. Idea.
In 90 days, your money will experience almost no growth (unless you are speculating with the money).
You will also permanently lose the contribution room.
You will also be forced to pay that amount back into your RRSPs based on a fixed, mandatory schedule.
The tax deduction benefit, if any, will eventually be offset upon withdrawal and you lose the ability to take the deduction in later years when your money will have more time to grow in a tax-deferred manner.
If you plan to buy a house in 3 months, and have the money available now, keep it in a savings account for 3 months rather than play this game.
By contributing now say $10K each in self and spousal RRSP for the purpose of HBP withdrawl, tax saving are huge at this time. And withdrawal under HBP from both self RRSP and spousal RRSP $25K each available. These need to be repaid in 15 years After two years meaning approx $1666 to be refunded in each RRSP. Even if person decideds not to repay for these withdrawls? Penality is that $1666 will be added to you income every year for next 15 years and one has to pay tax on this non repayment of $1666.
This way one is atleast able to defer Tax by saving today by contributing lumpsum today and pay o tax on $1666 due to non repayment.
Do you agree PratickM?
Quote:Not quite.
Originally posted by Heart Stealer
By contributing now say $10K each in self and spousal RRSP for the purpose of HBP withdrawl, tax saving are huge at this time. And withdrawal under HBP from both self RRSP and spousal RRSP $25K each available. These need to be repaid in 15 years After two years meaning approx $1666 to be refunded in each RRSP. Even if person decideds not to repay for these withdrawls? Penality is that $1666 will be added to you income every year for next 15 years and one has to pay tax on this non repayment of $1666.
This way one is atleast able to defer Tax by saving today by contributing lumpsum today and pay o tax on $1666 due to non repayment.
Do you agree PratickM?
I think the tax savings that you are seeing are misleading.
First of all, you are counting the tax "refund" as a benefit, and it's not.
The only reason you are seeing the refund is because you did not adjust your payroll tax witholdings earlier in the year to account for the RRSP contribution, and thus loaned money to the govt. for 1 year interest-free.
Secondly, the same refund is still available to you in future years.
In fact, the nominal refund may be higher in later years if income continues increasing.
Thirdly, the "refund" is merely deferred taxes.
When the RRSP plan is eventually collapsed and the minimum withdrawls start, you will pay your marginal tax rate for income on that.
So the refund that you get now, will be taxed away later.
There are two factors other than refunds to consider:
First, you lose the contribution room permanently because of this manoever.
That is an important loss.
Secondly, if you already have the down payment for the house ready and you are planning to buy soon, this HBP monoever accomplishes nothing.
The benefit of HBP is when you have had a chance to allow your RRSP to grow over a number of years and can withdraw the growth in addition to the contributions.
If it's only a few months, you gain nothing and lose the contribution room.
Just keep the cash in a savings account for a couple of months and then buy the house.
Trying to work around the system accomplishes nothing and simply wastes your time and costs you future savings.
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
