Both spouses can have IRAs and increase their nest egg if at least one of them works Trending Videos
Even if one spouse is currently working, married couples can increase their retirement savings by making contributions to a spousal individual retirement account (IRA). People without employment income are typically ineligible to make contributions to tax-advantaged retirement accounts (IRAs) because they do not receive “eligible” compensation. Married people without jobs who have working spouses are exempt, though, provided they both fulfill certain requirements. Here is what you need to know.
Yes, your spouse can contribute to a Roth IRA even if she doesn’t work, thanks to the spousal IRA provision. This allows a working spouse to contribute to an IRA in the name of a non-working spouse, offering a valuable retirement savings opportunity for those who don’t earn income from a job.
Understanding Spousal IRAs
What is a spousal IRA?
A spousal IRA is a type of individual retirement account (IRA) that allows a working spouse to contribute to an IRA in the name of a non-working spouse. This is particularly beneficial for couples where one spouse stays home to care for children, pursue education, or manage household responsibilities.
Eligibility requirements:
To contribute to a spousal IRA, you must meet the following conditions:
- File a joint tax return with your spouse.
- Have enough earned income to cover both your own and your spouse’s IRA contributions. This includes wages, salaries, tips, commissions, self-employment income, and nontaxable combat pay.
Contribution limits:
For 2024, the annual contribution limit for both traditional and Roth IRAs is the lesser of:
- $7,000 for individuals under age 50.
- $8,000 for individuals age 50 or older.
- 100% of your eligible compensation.
This means you can contribute up to $7,000 to your own IRA and $7,000 to your spouse’s IRA, for a total of $14,000. If you are both age 50 or older, the combined contribution limit increases to $16,000.
Benefits of spousal IRAs:
- Tax-advantaged savings: Spousal IRAs offer the same tax benefits as traditional and Roth IRAs. Traditional IRA contributions may be tax-deductible, while Roth IRA contributions grow tax-free and qualified withdrawals are tax-free in retirement.
- Retirement security for non-working spouses: Spousal IRAs provide a way for non-working spouses to build their own retirement nest egg, even if they don’t have earned income.
- Increased retirement savings potential: By utilizing both spouses’ IRAs, couples can significantly boost their overall retirement savings.
Making Spousal IRA Contributions
How to contribute:
Contributions to a spousal IRA can be made directly to the IRA custodian or trustee, just like any other IRA contribution. You can make contributions throughout the year, as long as the total amount contributed for the year does not exceed the annual limit.
Important considerations:
- Spousal IRAs are individual accounts. Each spouse must have their own IRA account, even if the working spouse is funding both accounts.
- Income limits for Roth IRA contributions: If you want to contribute to a Roth IRA for your spouse, there are income limits to consider. For 2023, couples with a modified adjusted gross income (MAGI) of up to $230,000 can contribute the full amount. The limit is phased out for couples with MAGIs between $230,000 and $240,000, and contributions are not allowed for couples with MAGIs exceeding $240,000.
Spousal IRAs: A Valuable Retirement Planning Tool
Spousal IRAs provide a valuable opportunity for couples to maximize their retirement savings potential, even if one spouse doesn’t work for pay. By understanding the eligibility requirements, contribution limits, and tax benefits, you can utilize this strategy to build a secure financial future for both spouses.
Additional Resources:
- Investopedia: What Is a Spousal IRA and How Does It Work?
- Investopedia: Making Spousal IRA Contributions
- Internal Revenue Service: Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)
Keywords: spousal IRA, non-working spouse, retirement savings, tax-advantaged, contribution limits, Roth IRA, traditional IRA, income limits, retirement planning
No Joint Accounts
Individual retirement accounts are just that: individual accounts. For example, they cannot be held jointly like a checking or savings account. Rather, the IRA of each spouse should be maintained under the name and taxpayer identification number of that spouse (usually their Social Security number).
Contribution Limits for Traditional and Roth IRAs
The individual contribution cap for Roth and traditional IRAs in 2024 is the lower of:
- $8,000 for anyone 50 years of age or above, and $7,000 for those under 50 as of the end of the year.
- 100% of eligible compensation
If both of you are 50 years of age or older, you can contribute those amounts to your spouse’s IRA as well, up to a maximum of $16,000.
Keep in mind that, regardless of the number of IRAs you own, those are the total amounts you can contribute for the year. For instance, you could divide $7,000 between your traditional and Roth IRAs, contributing $3,500 to each.
Spousal IRA Contribution non-working spouse (or retired) explained
FAQ
What are the rules for spousal Roth IRA contributions?
Can I contribute to a Roth IRA with no earned income?
Can a non working person contribute to a Roth IRA?
How much can a married couple contribute to a Roth IRA?
Can a spouse contribute to a Roth IRA without a job?
Even if you don’t have a conventional job, you may have income that qualifies as “earned.” Spouses with no income can also contribute to Roth IRAs using the other spouse’s earned income. Although it’s not true in all cases, if you’re paying taxes on any type of income from working, then there’s a good chance you can make Roth IRA contributions.
Can I contribute to my wife’s Ira if she doesn’t work?
Yes, you can contribute to your wife’s IRA if she doesn’t work, as long as you have earned income and file taxes jointly with your spouse. You can contribute to a spousal IRA based on your spouse’s earned income rather than your own. Should I open a spousal IRA? Opening a spousal IRA can help you and your spouse double your retirement savings.
Can a spouse use a spousal Roth IRA?
Typically, individuals need to earn income to contribute to a traditional individual retirement account (IRA) or a Roth IRA. However, if you’re married, you can use a spousal Roth IRA to boost your retirement savings potential—even if only one spouse works for pay. An IRA is an excellent tool for retirement savings.
Can a married person contribute to a Roth IRA?
As of 2012, you must be married and filing jointly with a modified adjusted gross income of less than $179,000 (that is, money earned through work, rather than through investments) in order to qualify for contributions to a Roth IRA for either yourself or your spouse. How Much Can You Contribute?