About this video

• Video Title: Every Couple Retiring Before 65 Needs To Watch This
• Channel: Parallel Wealth
• Speakers: Not specified in the transcript
• Duration: 00:09:05

Overview

This video explains a common pitfall for couples retiring before age 65: an unequal distribution of retirement income, leading to higher taxes. It demonstrates how using a spousal RRSP can help equalize income and reduce the tax burden during the crucial pre-65 retirement years. The video also touches upon the attribution rules associated with spousal RRSPs.

Key takeaways

• Unequal Asset Distribution: Many couples retiring early have the majority of their retirement savings (like RRSPs) in one spouse's name, leading to a higher tax burden when drawing income due to Canada's progressive tax system.
• Spousal RRSP Solution: Contributing to a spousal RRSP can help build assets in the name of the spouse with lower or no income, allowing for a more even distribution of taxable income in retirement.
• Tax Savings: By splitting income through a spousal RRSP, couples can significantly reduce their overall tax paid in the years leading up to age 65, potentially saving thousands annually.
• Attribution Rules: Be mindful of attribution rules with spousal RRSPs. If money is withdrawn within three years of contribution (current year + two more), it may be taxed in the hands of the original contributor. Planning ahead to ensure these years have passed before withdrawal is crucial.
• Importance of Early Planning: Proactive planning, even years before retirement, is key to structuring assets effectively to minimize taxes and maximize retirement income, especially if early retirement becomes a possibility.