What is a spousal IRA?

A spousal IRA allows an employed spouse to contribute to their non-income earning spouse’s IRA. The spousal IRA can be a Traditional or Roth IRA and is set up in the name of the non-working spouse. To qualify, the couple needs to file their taxes jointly and one spouse must have enough earned income to cover contributions to both parties' IRAs. This strategy can be useful to help maximize your retirement savings as a couple.

Spousal IRA ownership

In terms of ownership, a spousal IRA is established under the name of the non-income earning spouse. Even though the income-earning partner is the one contributing to the IRA, the non-working spouse holds the ownership rights. This means the non-income earning spouse has full control over investment decisions and distribution of funds.

Spousal IRA contribution limits

Are you wondering who can contribute to a spousal IRA? Under current law, most couples can contribute up to $14,000 ($7,000 each) to their IRAs in 2024, as long as their combined compensation is at least $14,000 for the year in which contributions are made. This means that the spouse with lower or no compensation can contribute $7,000 to a retirement plan for 2024. That amount goes up to $8,000 when that person turns 50, and the plan can be set up as either a Roth IRA or a Traditional IRA. For 2025, the limit remains the same at $7,000 for each spouse ($8,000 if age 50 or older).

Spousal IRA tax deduction information

Each year, contributions to spousal IRAs are reported on your joint federal income tax return. If you or your spouse is covered by an employer's retirement plan, your ability to deduct contributions to a spousal Traditional IRA from your taxable income may be limited. Click a link below to review the possible deduction amounts based on income:

• Traditional IRA – select the Modified Adjusted Gross Income dropdown and review the Combined Modified Adjusted Gross Income chart.
• Roth IRA – review the Annual Contribution Limits.

If you can deduct the Traditional IRA contribution, then you will pay taxes on the deductible contribution and earnings when you draw on them in retirement. If you can't deduct the contribution now, then you won't have to pay taxes on the non-deductible contributions in the future.

Even if you can't deduct the spousal IRA contribution, because your family income is too high or because you choose a Roth IRA instead of a Traditional IRA, consider making it anyway to help provide for your family's financial future. Regardless of how you save, anything is better than nothing.

Details on Internal Revenue Service guidelines should be reviewed.

Spousal IRA rules

Here are some Spousal IRA guidelines for you and your spouse to keep in mind:

• Earned income – One spouse must have sufficient income to cover contributions for both parties.
• File taxes jointly – You and your spouse must file taxes as “married filing jointly”.
• No co-ownership – The spousal IRA should be opened in the name of the non-working spouse.
• Spousal IRA contributions – Limits are subject to the same yearly maximums as regular IRAs.
• Tax deductions – May be limited if either spouse has access to an employer-sponsored retirement plan.
• Age limit – A couple can keep contributing to a spousal IRA as long as one of them is earning income, regardless of their age.

Spousal IRA benefits

A spousal IRA offers various benefits, including the opportunity to double the household's IRA contributions, even if only one spouse is working. This approach significantly increases the couple's retirement savings and may provide more security for the future. In addition, if a couple decides to contribute to a Roth IRA, they can enjoy tax-free withdrawals during retirement.

Each family’s financial situation and needs are different. Consider talking to a registered agent to discuss what type of IRA is best for you and your spouse. And now that you have learned information about spousal IRAs, you may be interested in reading more about other retirement topics like how to create a retirement income plan, how annuities work or benefits of working after retirement.