Question: I started contributing to my RRSP just last year. I have set-up a bi-monthly deduction of $100.00. For the 2004 tax year (end of year), my contributions were only $2200. I have over $14000 RRSP deduction limit for this year. I have saved some money in a savings account this past few years and I am wondering if I should maximize (or close to it) my contributions and my claim for this year using this savings to lower my taxes.

Answer: If you have a high cost loan, such as a credit card balance, then it may be more appropriate to pay it down before making RRSP deposits. You can accumulate your RRSP room until the loan is repaid, then concentrate on the RRSP accumulation.

Otherwise, you can make your full RRSP deposit, inclusive of the $2,000 overcontribution amount. At tax filing time, you can choose to claim the entire allowable RRSP deduction, or elect to carry forward a portion of it to a future tax filing.

Another approach is to allocate the cash between loan repayments and RRSP deposits.

Question: When is it advantageous for my spouse to use his RRSP deduction limit to contribute to my plan? Does it really matter whose plan gets the contribution?

Answer: Ideally, it would be preferable for two spouses to have similar taxable incomes during retirement. Therefore, the RRSP deposit would be made to the spouse's account who has the lesser assets.

Over time, you may have to tweak where deposits are made in order to be as close as possible to achieving the goal part of similar taxable incomes during retirement.

Remember that withdrawals from a spousal plan within three years of the last contribution are a taxable in the contributors' hands.

Question: My wife has never had her own RRSP but does have a Spousal RRSP that I started many years ago. This year she wants to make an RRSP contribution. Can she put the contribution in the Spousal RRSP or does she need to set up a new RRSP vehicle?

Answer: As a matter of course, comingling regular RRSP deposits with spousal deposits are usually not permitted. Your wife should open her own RRSP account and make her deposit to it.

Meanwhile, you may make further spousal deposits to the existing spousal account. The three year rule applies to spousal deposits if they are withdrawn. This rule also applies to RRIF withdrawals in excess of the minimums from a spousal account.

Each of you can also make a $2,000 overcontribution.

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.