In addition, if both spouses have income from eligible sources, they ll both be able to claim the federal pension tax credit. A spousal RRSP offers a convenient way to split retirement income. The lower-income spouse s RRSP contribution limit is unaffected by the funds placed in the spousal plan. He or she can still contribute up to the yearly maximum. When the RRSP funds are eventually withdrawn as income, they re taxed in the hands of the lower-income spouse.
Some restrictions apply, however, to discourage quick withdrawals.
Funds removed from a spousal plan in the year of contribution or the next two years are taxed as income in the hands of the contributor. If you re older than your spouse, a spousal RRSP may also allow you to continue making RRSP contributions past the age of 69. You can t contribute to your own RRSP past that age, but as long as you have earned income, you can contribute to your spouse s plan until he or she reaches 69. You still claim the tax deduction on the amounts you contribute. You can split income outside of an RRSP as well, by using money earned by the lower-income spouse for investments.