Spousal RRSP account

Question

I am a first time home buyer and am thinking of making use of the HBP (Home Buyer's Plan). Both me and my wife are currently employed and have RRSP accounts in financial institutions through our employers. I have $35000 in contribution limit whereas she has $9000. I was thinking of depositing $25000 into my RRSP account and $10000 into her RRSP account so that I can withdraw $25000 and she can withdraw $19000 under the HBP plan.

My question is can I deposit the $10000 into her RRSP account which she has with her employer or I have to open a separate RRSP account for this transaction and she would have to withdraw $9000 from her regular RRSP account and $10000 from her spousal RRSP account?

Answer 1

The existing account that her employer set up is probably not a Spousal RRSP, so for you to contribute your money to her RRSP you'd have to create a new account somewhere - could be with the same financial institution or somewhere else. But if you've got a joint bank account, the distinction between your money and her money becomes blurred. You're basically allowed to say the $10000 is her money as long as you can trace the funds back to amounts that she added (her paycheques). So in that case you could just use her existing RRSP if you want to.

There may be other reasons to consider an alternate account, such as having more flexibility or lower costs for investing your contributions. Often the plans that employers offer have only a small selection of mutual funds with medium to high MER costs. Since you're planning to withdraw for the HBP soon, this probably doesn't matter that much yet, but as you start re-contributing to replace what you took out, that money will probably not get touched until retirement and therefore you would want to invest it more efficiently. For that, I recommend you take a look at the model portfolios at Canadian Couch Potato, as Tangerine, TD e-Series, or buying ETFs through a discount broker are usually the lowest cost methods of growing your retirement portfolio.