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Everything You Need To Know About The Spousal IRA

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Updated November 30, 2023

A spousal individual retirement account (IRA) is not a special type of IRA. It’s a term referring to the IRS rules allowing a working spouse to contribute to an IRA in a non-working or lower earning spouse’s name.

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How do spousal IRAs work?

Spousal IRAs can help you maximize tax benefits, potentially lowering your overall tax burden, says Courtney Burrell, a financial professional with Empower. “They can provide both spouses with a dedicated source of retirement funds they manage and use for their own needs. A spousal IRA represents a commitment to both partners’ financial futures supporting the idea that retirement planning is a joint effort regardless of work status,” she explains.

Due to life’s unexpected situations, a spousal IRA gives a non-working spouse access to their own funds in an unforeseen event like the death of their spouse, divorce, or illness. “Money is still a very taboo topic, where many people would rather talk about death and politics than their money,” says Burrell. Involving both spouses in retirement and financial planning helps set a positive narrative for our children as we collectively work towards changing the money stigmas for future generations.”

Who is eligible for a spousal IRA?

To be eligible, you must file “married, filing jointly” on your tax returns.

Spousal IRAs are not available to unmarried couples. According to Burrell, the working spouse must have enough earned income (taxable income such as wages, salary, bonuses, commissions, and self-employment income ) to cover contributions for both parties.

As long as you meet the income requirements, there is no age limit to contribute to either a Roth or traditional IRA. 

Spousal IRA rules

You may choose between a Roth or traditional IRA. For a Roth IRA, you will not receive an upfront tax deduction, but your initial contributions plus any earnings will be tax free when you withdraw them later in life.

Traditional IRA contributions are tax deductible the year in which they are made and can be particularly beneficial during high income earning years. For 2023, individual contribution limits for both Roth and traditional IRAs are $6,500—$7,500 for those 50 years and older. 

The working spouse will need enough earned income to cover the contributions. “This means, for a couple in their 40s, the wage-earning spouse needs an earned income of at least $13,000 to max out their contributions,” says Burrell.

What to know before you open a spousal IRA

Before you contribute to a spousal IRA there are important considerations to be aware of including:

No joint ownership  

Each spouse individually owns their IRA. IRAs never have joint ownership.

Who is eligible to withdraw first  

If not making the maximum contribution to both spouses’ IRAs, the couple may want to consider which spouse will turn 59½ first if access to funds is a concern, says Cathleen Davis-Whitmore, vice president and an IRA product manager, Wells Fargo Clearing Services. “This is the age in which distributions can be made for any reason with no 10% additional tax imposed.”

How to open an IRA for a non-working spouse

The process is exactly the same as for opening a traditional or Roth IRA. Brokerage firms and many banks are among the financial institutions that offer IRAs. “If the contribution is based on both, like the example of Jane and John—the contributions can be made to the same IRA, they do not have to be separated or split,” adds Davis-Whitmore.

TIME Stamp: Boost your retirement savings as a couple

A spousal IRA is a kind of tax-advantaged retirement account that permits a working spouse to contribute toward a non-working spouse's retirement savings. There are requirements that need to be met, including that you and your spouse file your taxes jointly. Simply stated, your spousal IRA provides a way to boost your retirement savings as a couple. 

Frequently asked questions (FAQs)

Which states require spousal consent for IRA beneficiary designation?

A number of states consider property acquired during marriage to be community or marital property. If that’s the case in your state of residence, the IRA owner must get spousal consent if they want to name someone other than their spouse as the death beneficiary of their IRA, Burrell says. “Couples should consult with a tax professional any time they are making beneficiary designations,” she adds.

Washington, Texas, New Mexico, Nevada, Arizona, California, Louisiana, Idaho, and Wisconsin are marital property states. Married couples can make a community property election in South Dakota, Alaska, and Tennessee. 

Are spousal IRA contributions deductible?

Traditional spousal IRA contributions are fully or partially deductible based on a couple’s modified adjusted gross income (MAGI) and whether or not one or both spouses contribute to a workplace retirement plan. IRS Publication 590-A outlines these rules. 

“While Roth IRA contributions are never deductible, qualified distributions are tax-free,” explains Davis-Whitmore, with Wells Fargo. In general, Roth IRA distributions are qualified if the account has been open for at least five years and the account owner is 59½ or older. Since you have already paid taxes on the money contributed to a Roth IRA, you can withdraw your contributions, but not earnings, tax and penalty-free at any time.  

“Generally, Roth IRA distributions are qualified after five years and age 59½ and over, or as a result of other situations such as death or disability. The regular contributions made to a Roth IRA can be distributed at any time with no taxes or penalties.”

IRS Publication 590-B outlines the rules for distributions from both Roth and traditional IRAs.

Do spousal IRA contributions have to be in a separate account from a regular contribution?

No. Both regular and spousal contributions can be made to the same traditional or Roth IRA for that IRA owner.

Empower Personal Wealth, LLC (“EPW”) compensates Time Stamped for new leads. Time Stamped is not an investment client of Empower Advisory Group, LLC.

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