We often hear people talk about spousal IRAs, but does your spouse need one? Do they even exist? On the Get Ready For The Future Show, we’re answering YOUR questions! Like this one from Bradley in Cabot:

“Should I continue contributing to my spouse’s Roth IRA if they are now a stay-at-home parent or do I need to start a separate spousal IRA?”

Pro tip: the IRS doesn’t use or acknowledge the term “spousal IRA.” We definitely think contributing on your stay-at-home spouse’s behalf is a great idea, but if they have an IRA already, there’s no need to open something new unless you’re maxing out both of your IRA contributions! Janet and Scott explain more about this and other considerations you need in your financial plan for a stay-at-home spouse!

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❓ Have your own questions? Call or text us at 501.381.5228 or email show@getreadyforthefuture.com. And catch the Get Ready For The Future Show anywhere you get your podcasts.

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Does Your Stay-at-Home Spouse Need a Separate Spousal IRA?

In many households, one spouse traditionally takes on the role of the primary earner, while the other stays at home to take care of the family and household responsibilities. While this choice can be fulfilling for the stay-at-home spouse, it can also lead to financial insecurity in the long run. To combat this, many financial experts recommend a separate spousal IRA.

A spousal IRA allows the non-working spouse to contribute to an individual retirement account (IRA) even if they don’t have earned income. This means that the stay-at-home spouse can still save for retirement and benefit from the growth potential and tax advantages of an IRA.

Here are a few reasons why a separate spousal IRA may be beneficial for your stay-at-home spouse:

1. Retirement Savings: Saving for retirement is crucial for both partners in a marriage, regardless of their employment status. By contributing to a spousal IRA, the stay-at-home spouse can accumulate their own retirement savings, providing them with financial security in the future.

2. Tax Benefits: Just like a traditional IRA, contributions made to a spousal IRA may be tax-deductible, depending on your income level and filing status. Additionally, the earnings within the account grow tax-free, allowing your investment to compound over time.

3. Access to Funds: Having a separate spousal IRA ensures that both partners have access to retirement funds. This can be especially helpful if there is a divorce or separation, as the stay-at-home spouse will have their own retirement savings to rely on.

4. Financial Independence: Having a separate spousal IRA can help the non-working spouse maintain financial independence and security. It can also provide peace of mind, knowing that they have their own savings and are not solely dependent on their partner’s retirement funds.

Setting up a spousal IRA is relatively straightforward. The working spouse can simply contribute to an IRA on behalf of their non-working spouse. The maximum contribution limit is the same as a regular IRA, and the stay-at-home spouse must be under the age of 70 ½ and have a tax identification number (TIN).

However, it’s important to note that just like a regular IRA, there are income limits for making tax-deductible contributions. It’s crucial to consult with a financial advisor or tax professional to understand the rules and limits that apply to your specific situation.

In conclusion, a separate spousal IRA can be a valuable tool for stay-at-home spouses. It allows them to save for retirement, enjoy tax benefits, and maintain financial independence. By taking advantage of this option, couples can ensure a more secure and balanced financial future for both partners.