What is a spousal IRA?

Even if you or your spouse takes time away from work, learn how you may be able to use a spousal IRA to continue saving for retirement.

Two people holding hands

Many people leave paid employment to spend time on family responsibilities. It's important work and it can come with a retirement plan: a spousal Individual retirement account (IRA).

Spousal IRA contribution limits

Are you wondering who can contribute to a spousal IRA? Under current law, most couples can contribute up to $12,000 ($6,000 each) to their IRAs in 2020 and 2021 as long as their combined compensation is at least $12,000 for the year in which contributions are made. This means that the spouse with lower or no compensation can contribute $6,000 to a retirement plan for 2020 and 2021. That amount goes up to $7,000 when that person turns 50, and the plan can be set up as either a Roth IRA or a Traditional IRA.

Spousal IRA income limits

Spousal IRA contributions are reported to the IRS each year on your joint federal income tax return. If you or your spouse is covered by an employer plan, a contribution to a spousal Traditional IRA may be limited for a deduction from federal income taxes. If your spouse is covered by an employer plan, couples can take a full deduction based on their combined modified adjusted gross income. Below are the amounts based on income:

  • Traditional IRA – select the Modified Adjusted Gross Income section and look for Combined Modified Adjusted Gross Income.
  • Roth IRA – select 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.

Neither State Farm nor its agents provide tax or legal advice.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

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