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Spousal IRAs: Double Savings for Single-Income Couples

If you’re married and one spouse doesn't work for pay, a spousal IRA is an option, as long as you file taxes jointly and earn income to cover IRA contributions.
Investing, IRA, Retirement Planning

IRAs are touted as valuable retirement accounts, but you have to have your own income to contribute to one, right? Not necessarily.

Spouses who don’t work for pay can contribute to an IRA if they file taxes jointly with a spouse who does. That means a married couple can enjoy double the tax-deferred savings.

It’s called the spousal IRA. (Official name: Kay Bailey Hutchison Spousal IRA, after the senator who co-authored the bill that created it.)

How spousal IRAs work

“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.

“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,” Kovar says.

It’s a great way for couples to boost their retirement savings.

Dan Napierkowski, CFP, senior investment relationship manager at Schneider Downs Wealth Management

The couple 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.

“It’s a great way for couples to boost their retirement savings,” says Dan Napierkowski, a CFP and senior investment relationship manager at Schneider Downs Wealth Management in Pittsburgh.

As a bonus, contributing to a retirement account may bring you a valuable 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 $63,000 or less to qualify in 2018. See this IRS page for income limits.

Mind 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. Review our roundup of the best IRA providers to learn which one might be best for your situation.

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