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Spousal IRA: What It Is, How to Open One

Usually you must earn income to contribute to an IRA, but a spousal IRA lets couples double up on retirement savings even if only one spouse works for pay.
April 16, 2019
Investing, IRA, Retirement Planning
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IRAs are touted as valuable retirement accounts, but the rules say you have to earn an income to contribute to one, right? Not necessarily.

Even spouses who don’t work for pay can contribute to a spousal IRA if they file taxes jointly with a spouse who does. That means, if each spouse has an IRA, in 2019 they each can contribute up to $6,000 per year, for a total of $12,000 (or $7,000 each, for a total of $14,000 if they’re age 50 or older). That’s up from 2018’s limits of $5,500 or $6,500 per spouse.

How spousal IRAs work

There’s no special “spousal” account type. Spousal IRAs are literally just your typical IRA, but used by a person who’s married. That is, each spouse can use traditional or Roth IRAs, or both. The key is that the working spouse must earn at least as much money as is contributed to all of the couple’s IRAs.

“Say a wife is working, making $100,000 a year, and the husband is not working,” says Elijah Kovar, founding partner of Great Waters Financial in Minneapolis.

“[In 2018] she can contribute to her own traditional IRA — $6,500 if she’s over 50, $5,500 if otherwise — but she can also contribute $6,500 or $5,500 to her husband’s IRA,” he says.

» On track for retirement? Check out our retirement calculator.

Depending on the type of IRA you qualify for, you’ll enjoy a tax break either now or in the future (we talk about how to choose between a Roth vs. traditional IRA here). As a bonus, contributing to a retirement account may bring you another break at tax time: The saver’s credit is worth up to $2,000 for married couples who file jointly. Your adjusted gross income must be $64,000 or less to qualify in 2019 and $63,000 or less for the 2018 tax filing season.

The rules

In addition to the requirement that at least one spouse has enough earned income to cover the contributions for both, there are some other rules to consider:

  • The couple must file taxes as “married filing jointly.”
  • IRAs have strict income limits, and those rules apply here. A nonworking spouse can open a traditional IRA or a Roth, but only if he or she qualifies. See this page for income and other limits for both types of IRAs. “They call it a spousal IRA, but it’s just an ordinary IRA in the spouse’s name,” Kovar says.
  • The spousal IRA is not co-owned. It’s in the name of, and owned by, the nonworking spouse.
  • If you’re over 70½, you can’t contribute to a traditional IRA, the spousal version included. There is no such restriction on Roth IRAs.

Opening a spousal IRA

If a spousal IRA sounds right for you and your spouse, you can open an account at any leading IRA broker.

Opening an account is easy: You’ll need to provide some personal information, including birthdate and Social Security number, but that’s about it.

And the savings can pay off. Say you put $500 every month into an IRA (to reach the 2019 annual maximum of $6,000). If you earn a 6% investment return, you’d end up with more than $330,000 after 25 years.

See our roundup of the best IRA providers to learn which company might be best for your situation.

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