Which of the following scenarios would most effectively utilize spousal RRSP contributions for a couple planning their retirement in Canada?

Question: Which of the following scenarios would most effectively utilize spousal RRSP contributions for a couple planning their retirement in Canada?

Answer options:

• The higher-income spouse contributes to their own RRSP to maximize their personal tax deduction.
• The lower-income spouse contributes to a spousal RRSP in the name of the higher-income spouse. ✅ The higher-income spouse contributes to a spousal RRSP in the name of the lower-income spouse, who expects to be in a lower tax bracket in retirement.
• Both spouses contribute equally to their own individual RRSPs regardless of income disparities.

Correct answer: The higher-income spouse contributes to a spousal RRSP in the name of the lower-income spouse, who expects to be in a lower tax bracket in retirement.

Explanation: A spousal RRSP is designed to help equalize retirement income for couples. The higher-income spouse contributes to the lower-income spouse's RRSP, claiming the deduction. In retirement, the lower-income spouse withdraws the funds, ideally at a lower marginal tax rate, reducing the couple's overall tax burden.