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For many married couples, retirement planning often focuses solely on employer-sponsored retirement accounts such as 401(k)s or individual accounts like traditional or Roth IRAs. However, there is a lesser-known retirement savings option available to couples where one spouse does not work outside the home – the Spousal IRA.

A Spousal IRA allows a non-working spouse to contribute to an individual retirement account (IRA) based on the earned income of their working spouse. This can be particularly beneficial for stay-at-home moms or dads who are not employed outside the home but still want to save for their retirement.

The rules for a Spousal IRA are fairly straightforward. The working spouse must have earned income that equals or exceeds the total amount contributed to both IRAs – their own and their non-working spouse’s. The non-working spouse must be under the age of 70 ½ and the couple must file jointly for taxes in order to make contributions to a Spousal IRA.

Contributions to a Spousal IRA follow the same rules and limits as a traditional IRA. For 2020 and 2021, individuals under the age of 50 can contribute up to $6,000 to an IRA, while those age 50 and older can contribute an additional $1,000 as a catch-up contribution. This means that a working spouse can potentially contribute up to $12,000 to IRAs – their own and their non-working spouse’s – in a single year.

One key benefit of a Spousal IRA is the potential for increased retirement savings for the couple as a whole. By taking advantage of both spouses’ IRA contribution limits, the couple can potentially save more for retirement and grow their nest egg over time.

Another benefit of a Spousal IRA is the tax advantage it offers. Contributions to a traditional IRA are typically tax-deductible, meaning they reduce the couple’s taxable income for that year. This can result in a lower tax bill and potentially more money saved for retirement.

It’s important for couples considering a Spousal IRA to consult with a financial advisor or tax professional to ensure they meet all the eligibility requirements and understand the potential benefits and limitations of this retirement savings option. With careful planning and strategic contributions, a Spousal IRA can be a valuable tool for helping stay-at-home parents save for retirement and secure their financial future.