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LEARN MORE ABOUT: IRA Accounts

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A spousal Individual retirement account (IRA) is a type of retirement account that is designed for married couples where one spouse does not work or earns significantly less than the other. This type of IRA allows married couples to save for retirement together, even if only one spouse is earning an income.

One of the main benefits of a spousal IRA is that it allows the non-working or lower-earning spouse to contribute to their own retirement savings, even if they do not have earned income. This can be especially advantageous for stay-at-home parents or individuals who work part-time. By opening a spousal IRA, they can still save for their future and enjoy the tax advantages that come with a traditional or Roth IRA.

In a spousal IRA, the working spouse can contribute on behalf of their non-working or low-earning spouse, as long as they file a joint tax return. The contribution limits for spousal IRAs are the same as traditional or Roth IRAs, with an annual contribution limit of $6,000 in 2021 for individuals under the age of 50, and $7,000 for those over 50. These contributions are tax-deductible in the case of a traditional IRA, while withdrawals in retirement are taxed as ordinary income. Roth IRA contributions are made with after-tax dollars, but withdrawals in retirement are tax-free.

It’s important to note that spousal IRAs have certain requirements and limitations. Both spouses must be married and file a joint tax return in order to contribute to a spousal IRA. Additionally, the working spouse must have earned income equal to or greater than the total contributions made to both their own IRA and their spouse’s IRA. If these requirements are not met, the non-working spouse will not be able to contribute to a spousal IRA.

Overall, spousal IRAs can be a valuable tool for married couples to save for retirement and ensure financial security in their later years. By taking advantage of the tax benefits and contribution limits of spousal IRAs, couples can maximize their retirement savings and enjoy a comfortable lifestyle in their golden years. It is always recommended to consult with a financial advisor or tax professional to determine the best retirement savings strategy for your unique financial situation.