Who Should Invest with a Spousal IRA?

Written By Mary Beth Eastman
Last updated March 19, 2019

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March 19, 2019

Simple. Thrifty. Living.

An individual retirement plan, or IRA, is a kind of account that allows you to save for your retirement. It often has substantial tax benefits over other kinds of savings accounts.

There are many types of IRAs. The most commonly-known types are traditional IRAs, Roth IRAs, and rollover IRAs. But one of the lesser-known is called a spousal IRA. Could a spousal IRA be a useful way to save for your retirement? Read on to learn more about this unique kind of retirement account.

Normally, the laws regarding IRAs say that an individual must earn income to contribute to their own IRA. In other words, you usually can’t contribute to someone else’s retirement account.

Spousal IRAs circumvent these requirements by allowing someone to contribute to their spouse’s IRA. This way, if you’re married and out of work (like if you’re a stay-at-home parent), you can work with your spouse to save money toward retirement.

This isn’t a joint account: it’s actually put into the name of the spouse. Between the additional savings you can squirrel away into a spousal IRA, and the fact that many brokers will let you invest online in your retirement fund, and a spousal IRA is a convenient way to save additional money for retirement. In fact, you could see the best online IRA companies and get started immediately.

The IRS tightly regulates spousal IRAs, and puts several limitations on their use. First, only some people can save for retirement with a spousal IRA. You have to be legally married and filing jointly, and putting the IRA in your spouse’s name.

What’s more, the couple can’t put more money into their personal IRAs or spousal IRAs than their annual income. In other words, if you’re both out of work but have money saved up, you can’t put that money into your spousal IRA.

Finally, there are limitations on how much money you can contribute to your IRA, and how much money’s tax deductible. These can vary considerably from year to year, so it’s important to check with your online broker or online tax service to see what the most current laws are.

Spousal IRAs aren’t for everyone. But for many couples, they’re a key part of a sound investment strategy. By working closely with your online broker, you can figure out the best ways to save up money for you and your spouse’s future together.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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