Saturday, February 11, 2012

domestic bliss

So, you've gotten married, found a job you like and re-located to said job in a "new" city.  Your spouse may not have the same work opportunities he/she did before the move, but who knows.

The subject for this post is the spousal RRSP.

You're earning a f@*kton more money than you ever have before and your debts are coming down quickly, at the same time you're struggling to keep your spending under control until your contract review period is up.

Being self-employed will require a firm and disciplined hand to keep yourself from spending the money you will NEED to keep to remit for taxes even though you think you're doing the right thing paying down every debt you have.

I have some bad news for you my friend, taxes will be a shock.  You're going to jump up several tax brackets and owe probably more money to the CRA then you even made total in previous years.

The good news is that contributing to an RRSP can help with this.  Your contributions postpone paying tax on those earnings.  (You pay tax on them when you take them out later)  So if you contribute enough you can bump yourself down one tax bracket which I believe will let you keep an additional 6-10% or your income.

Now on to the juicy part: now that you have a consistent decent paying job and your spouse doesn't you will need to open up RRSP accounts for yourself AND a SPOUSAL RRSP for your spouse.  You "earn" contribution room through taxable employment and you can contribute (up to that earned amount) to either/or of the RRSP or spousal RRSP plans. 

The point of this is to make your retirement incomes equal which will potentially save tax dollars rather than keeping one person in a higher bracket and the other in the no-tax bracket. 

I know you think paying off your debts is a first priority, but keeping your money safe from the sticky sticky fingers of the government is also important too.  Open up your RRSPs and give me a call already!

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