“Welcome to the PlanEasy blog! We make personal finance easy.

Thanks for visiting.”

– Owen

What Is A Spousal RRSP? And Why Should You Use It?

What Is A Spousal RRSP? And Why Should You Use It?

Income splitting is often talked about in reference to high-income earners, but what about the average Canadian family? How does the average Canadian family split income and minimize tax? A spousal RRSP is one way for the average Canadian family to easily split income in retirement.

For high-income earners there are income splitting strategies like spousal loans or “income sprinkling”. Spousal loans are for families with lots of non-registered savings and a large difference in marginal tax rates between spouses. “Income sprinkling” can be used by families who own a corporation (although with the new TOSI rules has changed dramatically).

But what about your average Canadian household? Are there are income splitting options for them?

One very easy and accessible type of income splitting is a spousal RRSP. Unlike other income splitting strategies this one is very easy to set up, it doesn’t require a lawyer, and it’s easy to understand.

The big benefit of a spousal RRSP is that the average family can use it to “equalize” their registered assets before retirement. This allows for a more equal distribution of income in retirement and a lower overall tax bill for a household.

In addition to lower income tax it also opens up more opportunities to maximize government benefits in retirement.

But you might be wondering, isn’t it possible to split income after age 65 anyway, why would I need a spousal-RRSP?

While it’s true that after age 65 income splitting is much easier to do, it’s still a best practice to try to equalize registered assets before age 65. This allows for the maximum flexibility when creating a retirement drawdown strategy, especially when retiring early.

Equalizing registered assets can be extremely beneficial, especially before the age of 65 when there are fewer income splitting opportunities, for this reason we sometimes want to look at using a spousal RRSP to help split income in the future.

read more
The Benefits Of Retirement Planning

The Benefits Of Retirement Planning

Retirement planning is complex and includes many important considerations like retirement spending, income tax planning, income splitting, maximizing government benefits, deciding when to take CPP and OAS etc. etc.

All of these individual parts work together to create a great retirement plan. They are so important that even a small mistake can mean lower retirement spending or a higher chance of running out of money in the future. It could mean $10,000’s in extra tax or $10,000’s in reduced government benefits.

With a typical retirement plan spanning 30-40+ years it’s easy to understand how small change in assumptions can have a big effect on a retirement plan.

There are also many small decisions to consider when planning retirement, like when to convert RRSPs to RRIFs, when to start CPP, when to start OAS, how much to draw from investment assets, which investment assets to draw from first etc. etc.

In this post, we look at some of the important parts of retirement planning. What they are, what you should consider, and some additional resources to help.

read more
The Tax Free First Home Savings Account (TFFHSA) Explained

The Tax Free First Home Savings Account (TFFHSA) Explained

There is a new tax advantaged account in Canada, the Tax Free First Home Savings Account! Along with the TFSA and RRSP, the new Tax Free First Home Savings Account (TFFHSA) is another great way to reach your financial goals in a very tax efficient way. The account provides a significant advantage to those planning to purchase their first home and creates a new option for parents who are thinking about helping their children with a future home purchase.

The new Tax Free First Home Savings Account (TFFHSA) does add a little bit of complexity to an already complex landscape of tax planning options, however like the TFSA and RRSP, if used properly it can help accelerate progress towards financial goals like purchasing a home and planning for retirement.

When saving and investing for future goals you can now choose between TFSA, RRSP, and the new TFFHSA, and for families with small children, there is the RESP too.

The new Tax Free First Home Savings Account is very new, so in this post we’re going to explore how this account works, the eligibility criteria, the contribution and withdrawal rules, some things to possibly watch out for, and some strategic options when using it within your financial plan.

read more

Owen Winkelmolen

Advice-only financial planner, CFP, and founder of PlanEasy.ca

Work With Owen

“Welcome to the PlanEasy blog! We make personal finance easy.

Thanks for visiting.”

– Owen

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

What Is A Spousal RRSP? And Why Should You Use It?

What Is A Spousal RRSP? And Why Should You Use It?

Income splitting is often talked about in reference to high-income earners, but what about the average Canadian family? How does the average Canadian family split income and minimize tax? A spousal RRSP is one way for the average Canadian family to easily split income in retirement.

For high-income earners there are income splitting strategies like spousal loans or “income sprinkling”. Spousal loans are for families with lots of non-registered savings and a large difference in marginal tax rates between spouses. “Income sprinkling” can be used by families who own a corporation (although with the new TOSI rules has changed dramatically).

But what about your average Canadian household? Are there are income splitting options for them?

One very easy and accessible type of income splitting is a spousal RRSP. Unlike other income splitting strategies this one is very easy to set up, it doesn’t require a lawyer, and it’s easy to understand.

The big benefit of a spousal RRSP is that the average family can use it to “equalize” their registered assets before retirement. This allows for a more equal distribution of income in retirement and a lower overall tax bill for a household.

In addition to lower income tax it also opens up more opportunities to maximize government benefits in retirement.

But you might be wondering, isn’t it possible to split income after age 65 anyway, why would I need a spousal-RRSP?

While it’s true that after age 65 income splitting is much easier to do, it’s still a best practice to try to equalize registered assets before age 65. This allows for the maximum flexibility when creating a retirement drawdown strategy, especially when retiring early.

Equalizing registered assets can be extremely beneficial, especially before the age of 65 when there are fewer income splitting opportunities, for this reason we sometimes want to look at using a spousal RRSP to help split income in the future.

read more
The Benefits Of Retirement Planning

The Benefits Of Retirement Planning

Retirement planning is complex and includes many important considerations like retirement spending, income tax planning, income splitting, maximizing government benefits, deciding when to take CPP and OAS etc. etc.

All of these individual parts work together to create a great retirement plan. They are so important that even a small mistake can mean lower retirement spending or a higher chance of running out of money in the future. It could mean $10,000’s in extra tax or $10,000’s in reduced government benefits.

With a typical retirement plan spanning 30-40+ years it’s easy to understand how small change in assumptions can have a big effect on a retirement plan.

There are also many small decisions to consider when planning retirement, like when to convert RRSPs to RRIFs, when to start CPP, when to start OAS, how much to draw from investment assets, which investment assets to draw from first etc. etc.

In this post, we look at some of the important parts of retirement planning. What they are, what you should consider, and some additional resources to help.

read more
The Tax Free First Home Savings Account (TFFHSA) Explained

The Tax Free First Home Savings Account (TFFHSA) Explained

There is a new tax advantaged account in Canada, the Tax Free First Home Savings Account! Along with the TFSA and RRSP, the new Tax Free First Home Savings Account (TFFHSA) is another great way to reach your financial goals in a very tax efficient way. The account provides a significant advantage to those planning to purchase their first home and creates a new option for parents who are thinking about helping their children with a future home purchase.

The new Tax Free First Home Savings Account (TFFHSA) does add a little bit of complexity to an already complex landscape of tax planning options, however like the TFSA and RRSP, if used properly it can help accelerate progress towards financial goals like purchasing a home and planning for retirement.

When saving and investing for future goals you can now choose between TFSA, RRSP, and the new TFFHSA, and for families with small children, there is the RESP too.

The new Tax Free First Home Savings Account is very new, so in this post we’re going to explore how this account works, the eligibility criteria, the contribution and withdrawal rules, some things to possibly watch out for, and some strategic options when using it within your financial plan.

read more

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

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