The snowball, even in spring
Tired of hearing about snow when it's only just melted on your property? That's good, because we're talking about a different kind of snowball... the kind that pays off. This snowball could be your next savings strategy: the spousal RRSP.
Just about everyone knows about RRSPs and how they work. But few know about the spousal RRSP. It's a smart way to use spouse #1's RRSP room to benefit spouse #2, in a cycle that's repeated every year, with a tax benefit at the end that goes back to spouse #1.
How it works
Imagine this: you and your life partner decide to set up a joint RRSP. One of you uses his or her RRSP room to make contributions on behalf of the couple. In return, you benefit from tax returns that are then reinvested in the joint RRSP to further increase savings.
The advantages
1. Maximizing tax benefits
The idea is to make the most efficient use of the RRSP space available to both members of the couple: that's how you maximize your tax benefits. Tax returns generated in this way will also be reinvested in the RRSP of the spouse who contributed the least, thus increasing the common fund.
2. Simplified management
With a joint RRSP, managing contributions and tax returns is simplified. You have just one account to manage for both people, making it easier to keep track of and plan your finances.
3. Accelerated savings growth thanks to successive tax returns
The tax returns earned each year through contributions to the spousal RRSP are reinvested in the account, increasing the capital available for future contributions and investments. This process of reinvesting successive tax returns results in accelerated savings growth, allowing you to reach your financial goals more quickly and efficiently.
Conclusion
The spousal RRSP is an intelligent retirement savings strategy that offers significant tax advantages while simplifying the management of a couple's finances. By making judicious use of one person's RRSP space to benefit the other, and reinvesting the resulting tax returns, you create an efficient and profitable savings dynamic for the future. So, are you ready to make your financial snowball grow?
The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This blog was written, designed and produced by Pierre Dauth, Investment Funds Advisor with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this blog comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.