There are often opportunities to make IRA contributions through a spouse. Are you aware of the spousal IRA opportunities? Great insights from Relax Tax, your trusted financial partner. Click through to relaxtax.com to learn more….(read more)

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Spousal IRA Opportunities: Maximize Retirement Savings as a Couple

retirement planning shouldn’t be a solo endeavor, especially for married couples. Spousal Individual Retirement Accounts (IRAs) offer a valuable opportunity for couples to maximize their retirement savings together, regardless of whether one partner has earned less income or is not currently working.

What is a Spousal IRA?

A Spousal IRA is an IRA account that is opened in the name of a non-working spouse or one who earns significantly less income than the other spouse. The employed spouse contributes to the IRA on behalf of their partner, with contributions made to both spouses’ accounts as if they were separate accounts.

A spousal IRA contribution is treated just like a regular IRA contribution, with the same tax benefits and contribution limits. The maximum annual contribution limit for 2021 is $6,000, with an additional $1,000 catch-up contribution allowed for individuals over the age of 50.

The spousal IRA is not a separate type of IRA. Instead, it can be a traditional IRA, Roth IRA, or even a SEP-IRA. The type of IRA will depend on factors such as income, retirement goals, and tax considerations.

Who is eligible for a Spousal IRA?

A Spousal IRA is available to married couples who file joint tax returns and meet the following criteria:

1. The working spouse must have taxable compensation that is equal to or exceeds the sum of the contributions made to both their IRA and their non-working spouse’s IRA.

2. The non-working spouse must be under the age of 72 by the end of the year to which contributions are made.

3. The couple must file a joint tax return.

Why Consider a Spousal IRA?

A Spousal IRA is a powerful tool that enables couples to open and contribute to individual retirement accounts on behalf of both partners. This approach allows couples to make the most of their combined incomes, even if one spouse is not currently working or earning less income.

Opening a Spousal IRA not only increases the amount of tax-sheltered retirement savings, but it also creates a greater sense of financial security for both spouses in their golden years.

Additionally, if the non-working spouse has access to an employer-sponsored retirement plan, such as a 401(k) or 403(b), they may be limited in the amount they can contribute, and the contributions may not be tax-deductible. A Spousal IRA provides an opportunity to contribute more to retirement savings, with greater tax advantages, and more investment options.

Final Thoughts

retirement planning is an important part of financial planning for married couples. A Spousal IRA offers a valuable opportunity to maximize retirement savings by contributing to the non-working spouse’s individual retirement account, ultimately providing greater financial security and peace of mind for both partners in their golden years.

It is important for couples to discuss their retirement goals and consult with a financial advisor to determine the best investment strategy, taking into consideration their income, tax bracket, and retirement timeline. With careful planning, a Spousal IRA can help ensure that both partners are adequately prepared for a happy and healthy retirement.