A spousal IRA is a strategy that allows a working spouse to contribute to an individual retirement account (IRA) in the name of a non-working spouse with no income or very little income. This is an exception to the provision that an individual must have earned income to contribute to an IRA. However, the working spouse’s income must equal or exceed the total IRA contributions made on behalf of both spouses.

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In today’s society, it is common for one spouse to stay at home and take care of the household and children, while the other spouse goes out to work and brings in the income. However, just because one spouse isn’t working outside the home, doesn’t mean they can’t have their own retirement savings. This is where a spousal IRA comes into play.

A spousal IRA is a retirement account that allows a non-working spouse to save for retirement, even if they don’t have earned income of their own. This type of IRA is designed to help couples save for retirement together, regardless of their individual employment status.

In order to qualify for a spousal IRA, couples must be married and file a joint tax return. The working spouse must have enough earned income to cover both contributions to their own IRA and contributions to the spousal IRA. The maximum contribution limits for both a traditional IRA and a Roth IRA are the same for spousal IRAs as they are for regular IRAs – $6,000 for those under age 50 and $7,000 for those 50 and older in 2021.

A spousal IRA can be either a traditional IRA or a Roth IRA, depending on the couple’s preference and financial situation. With a traditional IRA, contributions are made with pre-tax dollars and grow tax-deferred until withdrawals are made in retirement, at which point they are taxed as ordinary income. With a Roth IRA, contributions are made with after-tax dollars, but withdrawals in retirement are tax-free.

By setting up a spousal IRA, the non-working spouse can start saving for retirement and enjoy the tax benefits that come with an IRA. This can help ensure that both spouses have a secure financial future, even if one of them isn’t working outside the home.

It’s important for couples to consult with a financial advisor or tax professional to determine the best retirement savings strategy for their individual situation. By taking advantage of a spousal IRA, couples can work together to build a nest egg for their retirement years, regardless of their employment status. Your non-working spouse can definitely have an IRA too – so start saving for the future today!