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A Spousal IRA (Individual retirement account) is a type of IRA that allows a married couple to save for their retirement with each person being able to contribute to the same account. This account is designed to help non-working or low-earning spouses build up their retirement savings by allowing them to contribute to an IRA, even if they don’t have earned income.

With a Spousal IRA, the working spouse can contribute up to $6,000 per year to their own IRA and up to $6,000 per year to their spouse’s IRA for a combined total of $12,000 per year. If the working spouse is over the age of 50, they can contribute an additional $1,000 per year to each account as a “catch-up” contribution.

To be eligible for a Spousal IRA, the married couple must file a joint tax return and the non-working spouse must have little or no earned income for the year. If either spouse has access to a retirement plan through their employment, income limits may apply.

One of the main benefits of a Spousal IRA is that it allows both partners in a marriage to save for retirement, even if one spouse does not work or earns a low income. This can help ensure that both partners can have a comfortable retirement, regardless of which spouse earned the majority of the household income.

Another benefit of a Spousal IRA is that it can lower the couple’s overall tax burden. Contributions to a traditional IRA are tax-deductible up to the contribution limit, which means that the couple’s taxable income can be reduced by the amount contributed to the account. Contributions to a Roth IRA are made with after-tax dollars, but earnings and withdrawals in retirement are tax-free.

It’s important to note that a Spousal IRA is treated as an individual’s IRA and is subject to the same rules, including contribution limits and distribution rules. Additionally, if the working spouse is already contributing the maximum amount to their own IRA, they may not be eligible to contribute to a Spousal IRA.

In summary, a Spousal IRA is a great option for couples who want to save for retirement, but one spouse does not earn an income or earns a lower income. This account allows the non-working or low-earning spouse to contribute to their own retirement savings, while also lowering the couple’s overall tax burden. It’s important to consult with a financial advisor to evaluate whether a Spousal IRA is the right option for your financial goals and circumstances.