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Spousal IRA Opportunities: Why It Is Important to Invest in Retirement Together

Investing in retirement accounts is a crucial step for anyone who wants to ensure that they will have enough money to support themselves when they retire. However, spouses who are not working, or who make less than their partner, may think that they cannot contribute to their individual retirement accounts (IRAs). Fortunately, there is an option for couples to take advantage of this situation called a Spousal IRA.

What is a Spousal IRA?

A Spousal IRA is an IRA account created for a non-working or low-earning spouse. A working spouse can contribute to their non-working spouse’s IRA, even if the non-working spouse has little or no income. This type of IRA is also sometimes called a “Spousal Roth IRA” as it allows contributions to a Roth IRA account.

Why a Spousal IRA is Important?

There are several reasons why a Spousal IRA is beneficial for couples who want to invest in their retirement together.

Firstly, a Spousal IRA will help non-working or low-earning spouses to build a secure retirement. This is crucial because they might not have a 401(k) or other retirement plan through their employer, and their Social Security benefits will be lower when they retire due to the lower income earned in their working years.

Secondly, a Spousal IRA is a tax-advantaged investment account. The spouse who contributes to the IRA will be able to deduct the contribution from their taxable income, reducing their tax bill. Moreover, with a Roth IRA, the contributions are not tax-deductible, but withdrawals in retirement will be tax-free.

Thirdly, a Spousal IRA will allow for a higher combined contribution limit for both spouses. In 2021, the contribution limit is $6,000, and an additional $1,000 catch-up contribution for those 50 or older. With a Spousal IRA, a couple could contribute up to $12,000 ($6,000 for the working spouse, $6,000 for the non-working spouse) or up to $14,000 ($6,000 each and a $1,000 catch-up contribution for each) for those 50 or older.

Lastly, a Spousal IRA can offer a diverse investment opportunity for both spouses. The couple can choose to invest in various assets, such as stocks, bonds, mutual funds, etc., which can help spread out the risk and increase return on investment.

Conclusion

In conclusion, Spousal IRA opportunities provide a wide range of benefits for couples who are planning to invest in their retirement together. It is a practical solution for non-working or low-earning spouses to build their retirement savings, reduce tax bills, increase their combined contribution limits, and diversify their investment portfolios. A Spousal IRA is a great way to plan for your future together and secure a comfortable retirement for both spouses.