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These are the benefits and drawbacks of having more than one IRA.
A Comprehensive Guide to Spousal IRAs and Individual IRA Limits for Married Couples
Married couples seeking to maximize their retirement savings have a unique opportunity to leverage both individual and spousal IRAs. This guide will delve into the intricacies of IRAs for married couples, exploring the number of IRAs they can have, contribution limits, and the benefits of utilizing spousal IRAs.
Navigating IRA Options for Married Couples
Married couples have the flexibility to open and contribute to both individual and spousal IRAs. Here’s a breakdown of the options available:
Individual IRAs:
- Each spouse can open and contribute to their own individual IRA, regardless of their income.
- The annual contribution limit for 2024 is $7,000 for individuals under 50 and $8,000 for those 50 and older.
- Contributions to individual IRAs can be made in either a traditional or Roth IRA, depending on the couple’s tax situation and retirement goals.
Spousal IRAs:
- A non-working spouse or a spouse with lower earnings can contribute to a spousal IRA, even if they don’t have earned income.
- The annual contribution limit for spousal IRAs is also $7,000 for 2024, or $8,000 for those 50 and older.
- The combined contributions to both spouses’ IRAs cannot exceed the total earned income of the couple.
Maximizing Retirement Savings with Spousal IRAs:
Spousal IRAs offer several advantages for married couples, particularly those with one spouse earning significantly more than the other. By utilizing a spousal IRA, couples can:
- Increase their total retirement savings: By contributing to both individual and spousal IRAs, couples can potentially double their annual contributions compared to individual IRAs alone.
- Boost retirement income for the non-working spouse: Spousal IRAs allow non-working spouses to build their own retirement nest egg, even if they don’t have earned income.
- Reduce tax liability: Traditional IRA contributions may offer tax deductions in the year they are made, while Roth IRA contributions allow for tax-free withdrawals in retirement.
Contribution Limits and Considerations:
- The combined contributions to both spouses’ IRAs cannot exceed the total earned income of the couple.
- If one spouse is not working or has low earnings, the other spouse can contribute up to the combined limit to both IRAs.
- For 2024, the total contribution limit for both spouses’ IRAs is $14,000, or $16,000 if both spouses are 50 or older.
- Contributions to spousal IRAs are subject to income limitations. For 2024, the modified adjusted gross income (MAGI) limit for full spousal IRA contributions is $228,000. This limit is gradually phased out for couples with MAGIs between $228,000 and $248,000.
Choosing the Right IRA for Your Situation:
The decision of whether to use a traditional or Roth IRA for individual or spousal contributions depends on several factors, including:
- Current tax bracket: Traditional IRA contributions may offer tax deductions in the year they are made, potentially benefiting those in higher tax brackets. Roth IRA contributions are not tax-deductible, but qualified withdrawals in retirement are tax-free.
- Expected future tax bracket: If you expect to be in a higher tax bracket in retirement, a Roth IRA may be more advantageous. Conversely, if you expect to be in a lower tax bracket, a traditional IRA may be preferable.
- Retirement income goals: Consider how much retirement income you need and choose the IRA type that best aligns with your goals.
Married couples have a variety of options when it comes to IRAs, allowing them to tailor their retirement savings strategies to their specific needs and goals. By understanding the different types of IRAs, contribution limits, and potential benefits, couples can make informed decisions to maximize their retirement savings and secure their financial future.
How many IRAs can you have? How many Roth IRAs?
The amount of IRAs you can own is unlimited. It is possible to possess multiple units of the same type of IRA, such as multiple Roth, SEP, and traditional IRAs.
Having said that, opening more IRAs does not automatically raise your annual contribution cap.
That’s $7,000 for traditional IRAs and Roth IRAs ($8,000 if you’re 50 years of age or older) in 2024.
If you’d like, you can divide that amount among the different types of IRAs in any given year. (If you’re rolling over money from a previous employer’s retirement plan, such as a 401(k), into an individual account, contribution limits do not apply.) ).
Discover how a backdoor Roth IRA could help you obtain a Roth IRA even if you don’t meet the requirements. Advertisement.
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| NerdWallet rating NerdWallets ratings are determined by our editorial team. The scoring formula for online brokers and robo-advisors takes into account over 15 factors, including account fees and minimums, investment choices, customer support and mobile app capabilities.
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NerdWallet rating NerdWallets ratings are determined by our editorial team. The scoring formula for online brokers and robo-advisors takes into account over 15 factors, including account fees and minimums, investment choices, customer support and mobile app capabilities.
5.0 /5 |
NerdWallet rating NerdWallets ratings are determined by our editorial team. The scoring formula for online brokers and robo-advisors takes into account over 15 factors, including account fees and minimums, investment choices, customer support and mobile app capabilities.
4.1 /5 |
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The drawbacks of multiple IRAs
The main drawback of multiple IRAs? The hassle factor. Here are some of the cons:
Double (or quintuple) the paperwork: Retirement accounts come with a lot of red tape. Even though managing your finances online is simpler than ever, having multiple accounts requires handling tax forms, notifications of updates and changes to services, privacy policies, and other disclosures.
Complicated retirement planning and portfolio management: An important component of retirement planning is asset allocation, which is the skill of balancing risk and reward in your portfolio. When your assets are dispersed among several accounts, it takes more work to keep an eye on performance and adjust the mix overall in order to maintain a consistent investing strategy.
Increased account and investment fee exposure: It makes sense to focus on higher-balance accounts and ignore smaller ones. However, failing to maintain and care for any retirement savings account can result in poor investment returns, particularly when it comes to investment fees, which over time reduce your earning power and include mutual fund sales loads and brokerage fees.
» In need of assistance? Review our comprehensive list of the top financial advisors.
How to Handle Investment Accounts as a Married Couple
FAQ
Can both spouses contribute 6000 to an IRA?
What is the maximum IRA contribution for a married couple?
Can you contribute $6000 to both Roth and traditional IRA in the same year?
Is there a limit to how many IRAs a person can have?
How much can a spouse contribute to a spousal IRA?
According to the IRS, “Each spouse can make a contribution up to the current limit.” Under the spousal IRA rules for 2023, a couple where only one spouse works can contribute up to $13,000 per year or $15,000 if both are 50 or older. If both spouses are 50 or older, that cap rises to $16,000 for a couple in 2024.
How much can a married couple contribute to a Roth IRA?
The Roth IRA income limits for married couples who want to make the maximum contribution are $218,000 in 2023 and $230,000 in 2024. If you’re a higher earner, a backdoor Roth IRA may be an option. You can contribute to traditional IRAs for you and your spouse regardless of your income.
Can a married person contribute to a spouse’s IRA?
Spousal IRAs allow a working individual to contribute to their spouse’s IRA as long as that person doesn’t work or doesn’t have enough income to support contributions. This rule allows one spouse to contribute to their partner’s IRA so that both may take advantage of the maximum contribution limits.
How much can a married couple save with an IRA?
If a married couple has enough compensation, each spouse can fully fund an IRA for the year. For 2022, that could mean combined IRA savings of $14,000 if both spouses are age 50 or over this year. This can be a big benefit if one spouse is outside the workforce taking care of children or elderly parents.