Two of the most powerful tax strategies for Canadian couples in retirement both involve income splitting — but they work differently and apply at different stages. A spousal RRSP is a contribution strategy for the accumulation phase. Pension income splitting is a tax election at filing time in retirement.
Spousal RRSP — Building Equal Assets Before Retirement
The higher-income spouse contributes using their own RRSP room to an account owned by the lower-income spouse. In retirement, the lower-income spouse withdraws and pays tax at their lower rate. Subject to the three-year attribution rule.
Pension Income Splitting — Reducing Tax at Filing Time
The higher-income spouse allocates up to 50 percent of eligible pension income to the lower-income spouse via Form T1032. No money moves. Both report their respective amounts. Used together, the two strategies reduce lifetime taxes, minimize OAS clawback, and equalize estate values.
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This article provides general financial education for Canadians. It is not personalized financial advice. For guidance specific to your situation, consider speaking with a CFP professional.