Spousal IRAs

For 2007, most couples can contribute up to $4,000 ($5,000 in 2008) each to their IRAs as long as their combined compensation is at least $8,000 ($10,000 in 2008).

This allows a lower-compensated spouse to take advantage of the tax savings offered by an IRA. A Spousal IRA may be set up as a traditional IRA or as a Roth IRA.

If you are age 50 or older, you may make additional "catch-up" contributions to your IRA. Over the next several years, the maximum annual contribution amount will increase as shown in the table below.

Note: Additional "catch-up" contributions have been included in amounts shown for age 50 or older.

A joint federal income tax return must be filed every year a Spousal IRA contribution is made. If one spouse is not covered by an employer retirement plan, contributions to a traditional IRA for the non-covered spouse can be federal income tax deductible. This deduction is phased out for couples with a combined adjusted gross income (AGI) between $150,000 and $160,000 for the 2007 tax year, and with a combined AGI between $156,000 and $166,000 for the 2007 tax year, and between $159,000-$169,000 for the 2008 tax year. The deductible contributions and earnings of a traditional IRA are subject to federal income tax when received.

Find out more information about Spousal IRAs in the Comparison of State Farm's Traditional and Roth IRAs.