by Charissa Anderson, CFP®, CDFA
Senior Vice President
Portfolio and Wealth Management
Maximizing retirement savings is an important goal for many couples. While there are a variety of tax-advantaged accounts that allow individuals to save for retirement, most are only available to those with earned income during the year. One exception to this rule is an individual retirement account (IRA) for a non-working or low wage-earning spouse, referred to as a spousal IRA.
Spousal IRAs have the same annual contribution limits as other IRAs. In 2024, the limit is $7,000 with an additional $1,000 catch-up contribution for those age 50 or older. The contributions can be made to a pre-tax traditional IRA, or an after-tax Roth IRA if certain income limits are met.
Each spouse can contribute up to the current limit; however, the total combined contributions cannot exceed the earned income reported on the couple’s tax return.
Rules:
There are a few important rules to remember about spousal IRAs:
The couple must file a joint tax return.
The spousal IRA is not co-owned. It is in the name of, and owned by, the non-working spouse.
Contributions are allowed until the due date of the tax return, without extension.
There is no age restriction on contributing.
Tax Deductibility:
Traditional spousal IRA contributions may be fully tax-deductible. This deduction, however, can be limited if either spouse is covered by a retirement plan at work and income exceeds certain levels.
The 2024 phase out ranges are detailed below.
Couples subject to these phaseouts may want to explore making non-deductible contributions and converting them to a Roth IRA, also known as a backdoor Roth contribution. More information about the Backdoor Roth and be found here.
Overall, spousal IRAs can be an important way to build up a married couple's retirement nest egg if only one spouse is employed. If this is something that interests you, reach out to your portfolio manager and wealth planning team to discuss how to best address your needs.
Ferguson Wellman, Octavia Group and West Bearing do not provide tax, legal, insurance or medical advice. This material has been prepared for general educational and informational purposes only and not as a substitute for qualified counsel. We believe the information provided is from reliable sources but should not be assumed accurate or complete. You should consult qualified professionals to understand how this information may, or may not, apply specifically to you.