How Married Couples Can Save For Retirement With A Spousal IRA (2024)

FAQs

How Married Couples Can Save For Retirement With A Spousal IRA? ›

Under the spousal IRA rules for 2023, a couple where only one spouse works can contribute up to $13,000 per year or $15,000 if both are 50 or older. Contributions to each account are capped by the individual annual IRA limits.

It's important to compromise when investing as a married couple, and one way to do that if you have different investing preferences and risk tolerances is by holding two separate investment accounts. That way, each spouse can maintain control over their own account.

An IRA cannot be held jointly by spouses. It can only be held in one individual's name.

If each spouse has an IRA, both can make the maximum annual contribution limit of up to $6,000 in 2022 (and you can contribute through April 18, 2023) or $6,500 in 2023 ($7,500 if age 50 and older).

Surviving spouses can roll over inherited IRA funds into their IRAs. If required minimum distributions must be taken from the inherited IRA, widows and widowers can calculate them based on their life expectancies. Spousal beneficiaries can also empty an inherited IRA on a five-year schedule.

If you file a joint return and have taxable compensation, you and your spouse can both contribute to your own separate IRAs. Your total contributions to both your IRA and your spouse's IRA may not exceed your joint taxable income or the annual contribution limit on IRAs times two, whichever is less.

You may contribute simultaneously to a Traditional IRA and a Roth IRA (subject to eligibility) as long as the total contributed to all (Traditional and/or Roth) IRAs totals no more than $6,000 ($7,000 for those age 50 and over) for tax year 2022 and no more than $6,500 ($7,500 for those age 50 and over) for tax year ...

Fewer accounts can save you frustration

Consider combining accounts to make things simpler. Doing so could make the task of managing your money a lot less frustrating and give you greater control. Over the years, many people open IRAs at different companies. Combining them could lead to less paperwork and lower costs.

The IRA transfer is provided for in your divorce decree or property settlement agreement, AND. The funds are transferred directly from one spouse's IRA to the other spouse's IRA.

The SECURE Act requires the entire balance of the participant's inherited IRA account to be distributed or withdrawn within 10 years of the death of the original owner. However, there are exceptions to the 10-year rule, and spouses inheriting an IRA have a much broader range of options available to them.

What is the income limit for spousal IRA for 2023? ›

Amount of your reduced Roth IRA contribution

$218,000 if filing a joint return or qualifying widow(er), $-0- if married filing a separate return, and you lived with your spouse at any time during the year, or. $138,000 for all other individuals.

You can contribute to traditional IRAs for you and your spouse regardless of your income. However, depending on your income, you may not be able to deduct the contribution on your taxes if the earning spouse is covered by a retirement plan at work. You can fund a spousal IRA no matter how old you are.

If you inherit an individual retirement account (IRA) from a spouse, you can treat it like your own IRA or roll it over into a traditional IRA you already have. If you are the beneficiary of an IRA inherited from someone other than your spouse, the options are different. You can't roll it over into an existing IRA.

When the IRA owner dies, the retirement assets held in the account are bequeathed to a beneficiary. Usually, the beneficiary can be any person such as a spouse, child, parent, grandchild, or friend, who has been designated as a beneficiary in the beneficiary designation form.

The benefits of having multiple IRAs. Having multiple IRAs can help you fine-tune your tax-minimization strategy and gain access to more investment choices and increased account insurance.

A married couple with an AGI of, say, $60,000 could save $400 on their 2022 tax bill by contributing $2,000 to each ($4,000 total) of their IRAs (the 10% level). If they managed to contribute $4,000 with an income below $43,500, their tax credit would be $2,000 (50% of their contributions).

Diversification is often a key part of a retirement strategy. Having multiple IRAs allows you to put your funds in different financial institutions or different types of investments.

Each spouse can make a contribution up to the current limit; however, the total of your combined contributions can't be more than the taxable compensation reported on your joint return.

How much can I contribute? The most you can contribute to all of your traditional and Roth IRAs is the smaller of: For 2021, $6,000, or $7,000 if you're age 50 or older by the end of the year; or your taxable compensation for the year.

It depends on what kind of IRA it is. Almost anyone can contribute to a traditional IRA, provided you (or your spouse) receive taxable income and you are under age 70 ½. But your contributions are tax deductible only if you meet certain qualifications.

What is the best mix of funds for retirement? ›

The conservative allocation is composed of 15% large-cap stocks, 5% international stocks, 50% bonds and 30% cash investments.

Some financial advisors recommend a mix of 60% stocks, 35% fixed income, and 5% cash when an investor is in their 60s. So, at age 55, and if you're still working and investing, you might consider that allocation or something with even more growth potential.

Ideally, you'll choose a mix of stocks, bonds, and cash investments that will work together to generate a steady stream of retirement income and future growth—all while helping to preserve your money.

In most cases, the account holder can name a beneficiary, whether that's a child, another relative, or someone else other than their spouse. In community property states, though, a spouse can inherit an IRA or must approve of the account holder's designated beneficiary in writing.

California is a Community Property State

In the case of a 401K or another type of plan, a spouse is entitled to 50% of the plan's acquired value during the course of the marriage. Any value accrued within a 401K or another plan a spouse possessed prior to marriage is that spouse's separate property.

In California, all types of retirement benefits are considered community property, which allows CalPERS benefits to be divided upon a dissolution of marriage or registered domestic partnership or legal separation.

There is no age limit on spousal IRA contributions.

As long as at least one member of the couple is earning income, you can contribute to your IRA no matter how old you are.

The 401(k) contribution limit for 2023 is $22,500 for employee contributions and $66,000 for combined employee and employer contributions.

For 2023, the IRA contribution limit is $6,500 ($7,500 for individuals age 50 and over). This is a $500 increase from the 2022 limit, regardless of age.

1. A nonworking spouse can open and contribute to an IRA. A non-wage-earning spouse can save for retirement too. Provided the other spouse is working and the couple files a joint federal income tax return, the nonworking spouse can open and contribute to their own traditional or Roth IRA.

Does a spousal IRA reduce taxable income? ›

Spousal IRA income limits

If you or your spouse is covered by an employer plan, a contribution to a spousal Traditional IRA may be limited for a deduction from federal income taxes. If your spouse is covered by an employer plan, couples can take a full deduction based on their combined modified adjusted gross income.

If you assume the IRA, you can take penalty-free distributions anytime, but you must also take RMDs. If you inherit the IRA, there will be no penalties for distributions. But you may have to take RMDs every year (if you choose the life-expectancy distribution method instead of the ten-year method).

When the owner of a retirement account dies, the account can be bequeathed to a beneficiary. A beneficiary can be any person or entity that the owner has chosen to receive the funds. If no beneficiary is designated beforehand, the estate will generally become the recipient of the account.

However, distributions from an inherited traditional IRA are taxable. This is referred to as “income in respect of a decedent.” That means if the owner would have paid tax, the income is taxable to the beneficiary. If you inherit the IRA from your spouse, you have the option to treat the IRA as your own.

Whom should I not name as beneficiary? Minors, disabled people and, in certain cases, your estate or spouse. Avoid leaving assets to minors outright. If you do, a court will appoint someone to look after the funds, a cumbersome and often expensive process.

If your spouse dies, do you get both Social Security benefits? You cannot claim your deceased spouse's benefits in addition to your own retirement benefits. Social Security only will pay one—survivor or retirement. If you qualify for both survivor and retirement benefits, you will receive whichever amount is higher.

The Spouse Is the Automatic Beneficiary for Married People

A spouse always receives half the assets of an ERISA-governed account unless he or she has completed a Spousal Waiver and another person or entity (such as an estate or trust) is listed as a beneficiary.

If married and filing jointly, your joint MAGI must be under $228,000 in 2023. Annual Roth IRA contribution limits in 2023 are the same as traditional IRAs: You can contribute $6,500 a year if you're under 50, or $7,500 if you're 50 or older.

Provided the other spouse is working and the couple files a joint federal income tax return, the nonworking spouse can open and contribute to their own traditional or Roth IRA. A nonworking spouse can contribute as much to a spousal IRA as the wage earner in the family.

You can contribute to an IRA even if you, or your spouse, are already contributing the maximum to a 401(k), 403(b), 457, TSP or other retirement-savings plan.

Can my wife and I each contribute 6000 to Roth IRA? ›

Each spouse can make a contribution up to the current limit; however, the total of your combined contributions can't be more than the taxable compensation reported on your joint return.

That means if you both want to contribute the maximum to an IRA, and you're both under 50, your spouse will need to earn at least $13,000 (to cover the $6,500 annual maximum for each of you in 2023).

The IRS restricts who can contribute to a Roth IRA. These accounts are designed to be owned by a single person, so you cannot establish a joint Roth IRA with your spouse.

Key Takeaways. Stay-at-home parents can fund IRAs if their spouse works and the couple files taxes jointly. Such retirement savings may be tax deductible, depending on your MAGI.

The working spouse and the non-working spouse each own IRAs under their own names. They can be accounts each spouse opened before they were married, while they were married and both working, or one that the non-working spouse opened when he or she was not working.

If you participate in an employer's retirement plan, such as a 401(k), and your adjusted gross income (AGI) is equal to or less than the number in the first column for your tax filing status, you are able to make and deduct a traditional IRA contribution up to the maximum of $6,500, or $7,500 if you're 50 or older, in ...