Certified Financial Planner (CFP) Practice Exam · Question
What is the primary tax planning advantage of initiating a spousal Registered Retirement Savings Plan (RRSP)?
A spousal RRSP is primarily used to equalize retirement income between spouses, allowing the higher-income spouse to contribute and receive a tax deduction, and
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Question: What is the primary tax planning advantage of initiating a spousal Registered Retirement Savings Plan (RRSP)?
Answer options:
- To allow both spouses to contribute to the same RRSP account. ✅ To enable income splitting in retirement, potentially reducing the household's overall tax burden.
- To guarantee a higher rate of return on investments.
- To avoid probate fees upon the death of the contributing spouse.
Correct answer: To enable income splitting in retirement, potentially reducing the household's overall tax burden.
Explanation: A spousal RRSP is primarily used to equalize retirement income between spouses, allowing the higher-income spouse to contribute and receive a tax deduction, and in retirement, the lower-income spouse withdraws, resulting in potential income splitting and lower overall household taxes.
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