21 Aug What is a Spousal IRA?
What is a Spousal IRA?
Spousal IRA’s are an effective way to save for retirement if one of the two spouses is a stay at home parent or does not have earned income. A spousal IRA is simply an IRA that is owned by the non-working spouse that the working spouse contributes to.
In order to contribute to a spousal IRA, the following conditions must be met:
- Your tax filing status must be Married Filing Jointly
- The IRA must be in the name of the non-working spouse. You cannot have a “Joint IRA”
- The working spouse must have earned income that exceeds the amount of contributions for both the working spouse’s IRA and the non-working spouses’ IRA
- The non-working spouse must be under age 70 1/2 in the year of the contribution for a traditional IRA. There are no age restrictions on a Roth IRA for a non-working spouse
For the most part, the rules are the same for a spousal IRA as for a regular IRA:
- The contribution limits for an IRA in 2018 are $5,500 if you’re under the age of 50 with a $1,000 “catchup” provision if you are 50+
- The income limits for contributing to a Roth IRA: Contribution limits start to get phased out starting at MAGI of $189,000 and fully phased out at MAGI of $199,000
- After the Spouse turns 70 ½, they will be required to take distributions if the spousal IRA is a traditional IRA
The deductibility of spousal IRA contributions depends upon whether or not the working spouse participates in an employer-sponsored retirement plan and their income. If the working spouse does not participate in the employer-sponsored retirement plan, then the contributions to a spousal IRA are fully deductible. However, if the working spouse is covered by an employer-sponsored plan and their income exceeds certain limits, then the contributions to the spousal IRA are not fully deductible.
How to open a Spousal IRA at MyRoboAdviser™:
The spouse will have to open a Roth or Traditional IRA account in their own name, with a separate email address. Through the new login you are able to link your shared bank account and fund the spouse’s IRA.
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Last updated, August 21, 2018
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