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As a stay-at-home parent, you may believe that saving for retirement isn’t an option. However, with the help of a spousal IRA, you can contribute to your retirement savings even if you don’t have personal income. This guide will explain how spousal IRAs work and how you can utilize them to build your retirement nest egg.
Understanding Spousal IRAs
A spousal IRA is a retirement account that allows a non-working spouse to contribute to an IRA even if they don’t have earned income. This is possible because the IRS allows one spouse to contribute to an IRA using the earned income of the other spouse, as long as they file a joint tax return.
Benefits of Spousal IRAs
- Increased Retirement Savings: Spousal IRAs allow stay-at-home parents to contribute to their retirement savings, even if they don’t have personal income. This can significantly boost their retirement nest egg and provide financial security in their later years.
- Tax Advantages: Spousal IRAs offer the same tax advantages as traditional and Roth IRAs. Traditional IRA contributions are tax-deductible, and earnings grow tax-deferred until retirement. Roth IRA contributions are made with after-tax dollars, but qualified withdrawals in retirement are tax-free.
- Equal Retirement Savings: Spousal IRAs allow stay-at-home parents to build retirement savings that are equal to their working spouse’s. This can help ensure financial security for both partners in retirement.
Contribution Limits
The contribution limit for spousal IRAs is the same as for individual IRAs. For 2023, the contribution limit is $6,500 for individuals under 50 and $7,500 for those aged 50 and over.
Choosing the Right Spousal IRA
There are two types of spousal IRAs: traditional and Roth. The best choice for you will depend on your individual circumstances.
- Traditional IRA: Contributions are tax-deductible, and earnings grow tax-deferred until retirement. However, withdrawals in retirement are taxed as income.
- Roth IRA: Contributions are made with after-tax dollars, but qualified withdrawals in retirement are tax-free.
Investing Your Spousal IRA
Once you’ve opened a spousal IRA, you’ll need to invest the funds. You can choose from a variety of investment options, such as stocks, bonds, and mutual funds. It’s important to choose investments that align with your risk tolerance and retirement goals.
Spousal IRAs offer a valuable opportunity for stay-at-home parents to save for retirement. By utilizing this tool, you can build a secure financial future for yourself and your family. Remember to consult with a financial advisor to discuss your specific situation and determine the best retirement savings strategy for you.
Additional Tips for Stay-at-Home Parents
- Start Saving Early: The earlier you start saving for retirement, the more time your money has to grow. Even small contributions can make a big difference over time.
- Live Below Your Means: It’s important to live within your means and avoid unnecessary expenses. This will free up more money that you can save for retirement.
- Seek Professional Advice: A financial advisor can help you create a personalized retirement plan that meets your individual needs and goals.
Disclaimer: This guide is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor for personalized guidance on retirement planning and spousal IRAs.
Single-income households will definitely want to know about this retirement account option.
There are benefits to being a stay-at-home parent, such as having more time to spend with your kids and not having to pay astronomical prices for daycare or a babysitter.
For many, it also has one major disadvantage: you might not be able to make any money while taking care of your kids unless you can find a flexible, remote job. And that can make retirement savings much more difficult.
However, there is a rule specifically for married couples that might simplify things. Heres what you need to know.
A spousal IRA could boost your household retirement savings significantly
Generally speaking, if you aren’t receiving income yourself, you can’t contribute to a retirement account. However, there is one exception to this rule provided by the government, and that is a spousal IRA.
This is a regular IRA that was opened in the name of a stay-at-home spouse, either traditional or Roth. As long as your spouse makes enough money to cover contributions to both their personal retirement accounts and the spousal IRA, you are able to save money there.
Let’s take an example where you and your partner want to max out your IRAs this year. This entails making a contribution of roughly $6,500 if you’re under 50 or $7,500 if you’re over 50. You can use a spousal IRA to reach your goal as long as your partner earns at least $13,000 ($15,000 if 50 or older).
To benefit from a Spousal IRA, you will need additional funds that you feel comfortable saving for retirement. And if you only have one source of income, that might not be simple. However, if your family can afford it, you might be able to use this to effectively double your annual household IRA contributions.
Should a Stay at Home Parent Open a Roth IRA?
FAQ
Can a housewife contribute to a Roth IRA?
Can stay-at-home mom contribute to Roth?
Can I contribute to a Roth IRA if I’m not working?
Can stay-at-home mom contribute to 401k?
How much can a stay-at-home parent contribute to a Roth IRA?
You can contribute up to $6,000 ($7,000 if you’re 50 or older) to a Roth IRA this year. 1 But there are some income limits—so check with an investment professional to make sure this can work for your situation. Now, where does all this investing money come from if you don’t get paid for all your hard work as a stay-at-home parent?
Can a spousal IRA help a stay-at-home parent save for retirement?
As a stay-at-home parent, you might think saving for retirement isn’t an option for you. But we’ve got some great news: Just because you aren’t the primary breadwinner doesn’t mean you can’t save for retirement thanks to two magic words— spousal IRA . We’ll show you how!
Can a spousal IRA be opened in a stay-at-home spouse?
But the government makes one exception to this rule in the form of a spousal IRA. This is a regular IRA, either traditional or Roth, opened in the name of a stay-at-home spouse. You can save money there, as long as your partner earns at least enough income to cover contributions made to the spousal IRA and their own retirement accounts.
Can a 18 year old contribute to a Roth IRA?
Provided you make earned income, there is no age limit to contribute to a Roth IRA. This means that even those under 18 can contribute to Roth IRAs. In fact, parents can open a Roth IRAs for kids to help their children invest for the future. Contributions are subject to the earned income requirement even for those that are 18 or younger.