Well it’s that time of year again! We’ve received our Notices of Assessment and therefore know exactly what the CRA thinks we can put into our RRSPs for 2014. Since ING Direct was sold to Scotiabank it has become Tangerine.ca with a revised website. So I decided to check exactly how to make a new contribution to our existing spousal RRSP from our existing Tangerine savings account while topping up our RRSPs.

One Reason Why Spousal RRSPs are Useful

Right now, income taxes in Canada for most people are calculated based on the person’s total personal income.

For a married couple,
if one person has income of $150 000 per year with no special deductions in Ontario in 2013 that person would pay about $48 752 in tax.
If the spouse had income of $50 000 that year, the spouse would pay about $8758.
That’s a total in tax of about $57 510.

If, instead, they each earned $100 000, they would each pay about $26 599.
That’s a total of about $53 198.
They would save $4 312 in taxes.

There may be no simple way to ensure two working people have almost identical incomes.

However, with some planning for retirement it may be possible for the couple to have almost identical retirement incomes. This could reduce their combined income tax bill during retirement.

One way to balance retirement income is to create a larger RRSP for the spouse with the lowest other sources of retirement income (e.g. work pension income; investment income; rental income; etc.) Obviously, you would want to only increase the RRSP until the projected taxable income for the two people balances.

Now at this time the Canadian government is letting married and common law couples who are 65 years of age and retired split their RRSP/RRIF, LIRA/LIF retirement income when declaring their income for taxes. They are not allowing couples under 65 to do this yet, though. So if early retirement is a possibility, it’s still worth considering maximizing the RRSP of the spouse who will otherwise have the lowest income until their income is brought up to the same level.

If the spouse with the highest retirement income has no RRSP contribution room, then there is nothing that can be done via a spousal RRSP.

However, if that spouse has contribution room, instead of using it for her or his own personal RRSP, the higher-income-in-retirement spouse can contribute to a Spousal RRSP for their lower-income-in-retirement partner.

Here’s an example:

• Kimiyo will receive $25 000 a year from a work pension, indexed to inflation in retirement, starting at age 58.
• Yusuf will receive no work pension in retirement.
• Both will receive 60% of the maximum CPP and 100% of the maximum OAS.
• They hope to retire at 58.

If Kimiyo has any available RRSP contribution room, she might want to use it to contribute money to a Spousal RRSP for Yusuf. Ideally, his RRSPs (personal and spousal combined) should be projected to generate  $25 000 per year, indexed to inflation, in retirement, before they start contributing equally to their personal RRSPs.

Making a Contribution to a Spousal RRSP at Tangerine

1. Go to: Tangerine.ca
2. From the list of links on the left side of the screen, click on Move my money.
   When the screen opens, usually the CAD button will be shaded the darkest gray. That means that you are requesting to make a contribution is Canadian dollars. For a RRSP contribution, this is the usual choice, so just leave it that way.
3. In the Amount text box, type the amount you want to contribute to your spouse’s RRSP.
4. From the drop-down list in the From box, select the account from which to take the money to make the contribution.
5. From the drop-down list in the To box, select your spouse’s Spousal RRSP account number.
6. For the When line, click to select, and darken the gray shading, for one of
   • Now
   • Later; or
   • Ongoing

   I selected Now.

7. Read the warning about checking your RRSP contribution limit. For example, the maximum amount you can contribute to your spouse’s RRSP is *YOUR* maximum allowable RRSP contribution for the year. It doesn’t matter if your spouse has any RRSP room or not. A spousal contribution comes out of your room.
8. If everything looks ok, click on the Next button.
9. Review the details of the proposed contribution. If they are ok, click on the Confirm button.
10. Make a note of your confirmation number in case you need to discuss the transaction with Tangerine. You can print it by clicking on the Print button.
11. Click on the Continue Banking button. (If you are finished, click on the Log me out and close your browser session.)

Did It Work?

1. If desired, click on View My Accounts.
2. Click on the account you used to make the contribution. You should see the withdrawal listed on the Transaction History.
3. Out of curiousity, I clicked on the link on the left side of the screen called My documents.
4. I then clicked on the link Tax receipts.
5. I cannot select 2014 from the View drop-down list. So I cannot view and print my RRSP contribution tax slip yet. I’ll probably have to wait till January 1, 2015.
6. If you are finished banking, click on the Log me out link and then close your browser session.

Well, that’s another task off the list!

UPDATE: Please be aware that as of January 2015, Tangerine plans to start charging a fee if you transfer your RRSP or TFSA from Tangerine to another bank, credit union, brokerage or financial institution.

Related Reading

• ING Direct is Now Tangerine.ca
• CRA Article: Pension Income Splitting

Join In
Have you topped up your RRSPs for 2014 yet? Or are you laughing hysterically because the polar ice caps are more likely to start freezing up again today than you are to find enough money today to max out your RRSP? (Until our mortgage was gone we didn’t max ours out either.) Please share your RRSP insights with a comment.