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When it comes to retirement savings, many couples often rely on individual retirement accounts (IRAs) to secure their financial future. However, what some may not know is that there is also an option called a spousal IRA. This type of account can be a helpful tool for married couples looking to maximize their retirement savings and take advantage of tax benefits. Here’s what you need to know about spousal IRAs.

What is a Spousal IRA?
A spousal IRA is a type of individual retirement account that allows a non-working spouse to contribute to an IRA even if they do not have earned income. This can be especially beneficial for couples where one spouse earns significantly more than the other, or if one spouse has chosen to stay at home to care for children or other family members.

Who is Eligible for a Spousal IRA?
In order to contribute to a spousal IRA, the couple must file a joint tax return. The working spouse must have enough earned income to cover both their own contributions to their own IRA as well as any contributions to the spousal IRA. The non-working spouse must be under the age of 70 ½ in order to contribute to a Traditional IRA, or under the age of 72 in order to contribute to a Roth IRA.

How Much Can You Contribute?
The contribution limits for a spousal IRA are the same as for a regular IRA. For the year 2021, individuals under the age of 50 can contribute up to $6,000, while those 50 and older can contribute up to $7,000. These limits apply to both types of IRAs, Traditional and Roth, and can be split between the working spouse’s account and the spousal IRA in any way the couple chooses.

What are the Tax Benefits?
Contributions to a Traditional IRA are tax-deductible, meaning that they can lower the couple’s overall taxable income for the year. This can result in a lower tax bill and potentially a larger refund come tax time. Contributions to a Roth IRA, on the other hand, are not tax-deductible, but the earnings in the account can grow tax-free, and withdrawals in retirement are also tax-free.

In conclusion, a spousal IRA can be a valuable tool for married couples looking to boost their retirement savings and take advantage of tax benefits. By understanding the eligibility requirements, contribution limits, and tax benefits, couples can make informed decisions about how to best utilize this type of retirement account. If you think a spousal IRA might be right for you and your spouse, consider speaking with a financial advisor to determine the best strategy for your individual financial situation.