Spousal IRA contribution rules are designed to help married couples maximize retirement savings by allowing a working spouse to contribute to an Individual Retirement Account (IRA) for a non-working or low-income spouse. This approach enables couples to effectively double their IRA contributions, even if one spouse has little or no earned income. According to IRS guidelines, the working spouse’s income supports the contribution limits for both spouses as long as they file jointly and meet certain criteria.

How Do Spousal IRA Contributions Work?

Under standard IRA contributions, the account holder must have earned income. However, the spousal IRA provision recognizes household finances rather than individual earnings alone. For couples filing jointly, the working spouse can make contributions up to the annual IRA limits on behalf of both spouses.

Key eligibility requirements include:

  • Married filing jointly status.
  • The working spouse must have sufficient earned income to cover both contributions.
  • The non-working or low-earning spouse has little to no taxable compensation.
  • Contributions must stay within the annual limits set by the IRS.

Contribution Limits for 2024

For the 2024 tax year, the IRS limits IRA contributions to:

  • $6,500 per individual under age 50.
  • $7,500 per individual age 50 or older (to include a $1,000 catch-up contribution).

A working spouse can contribute the full amount to their IRA and also contribute an equivalent amount to the non-working spouse’s IRA, provided income requirements are met. For example, a couple under 50 can contribute up to $13,000 annually combined.

Types of IRAs that Qualify

Both Traditional IRAs and Roth IRAs can be used for spousal contributions:

  • Traditional IRA offers tax-deductible contributions depending on income and filing status, with tax-deferred growth.
  • Roth IRA contributions are made with after-tax dollars, offering tax-free qualified withdrawals.

Eligibility for Roth IRA contributions depends on income thresholds, so high earners may have reduced or no eligibility.

Who Benefits from Spousal IRAs?

Spousal IRAs are particularly advantageous for:

  • Couples where one spouse stays at home or earns little income.
  • Stay-at-home parents without taxable compensation.
  • Couples seeking to maximize tax-advantaged retirement savings.

Tips for Maximizing Spousal IRA Contributions

  1. File Jointly: Spousal IRA contributions require married filing jointly status.
  2. Contribute Early: Early-year contributions allow for more potential growth.
  3. Choose Between Roth and Traditional: Analyze your tax situation to pick the best IRA type.
  4. Monitor Income Limits: Be aware of income phaseouts that may affect Roth contributions.
  5. Avoid Overcontributions: Excess contributions are penalized by the IRS; stay within limits.

Common Misconceptions

  • Both spouses do not need earned income; only one working spouse is required.
  • Filing separately disqualifies spouses from making spousal IRA contributions.
  • High income can limit Roth IRA eligibility for the non-working spouse.
  • Spousal IRAs do not automatically create extra tax savings; benefits depend on IRA type and income.

FAQ

Can both spouses contribute to their own IRA accounts?
Yes. Each spouse can have their own IRA, and the working spouse can contribute to the non-working spouse’s IRA under spousal IRA rules.

What if we file separately?
Married filing separately generally disqualifies you from spousal IRA contributions, with limited exceptions.

Are Roth IRA contributions allowed for a spouse?
Yes, if income limits and other IRS rules are met.

Do contribution limits change with age?
Yes, individuals age 50 or older can contribute an additional $1,000 catch-up amount.

Summary Table of Key Spousal IRA Rules

Requirement Details
Filing Status Married filing jointly
Income Source Working spouse must have sufficient earned income
Non-working Spouse Income Little or no earned income
Annual Contribution Limit $6,500 (under 50) / $7,500 (50 and over) per person
IRA Types Traditional and Roth IRA
Tax Benefits Vary by IRA type and household income

Spousal IRA contributions offer a powerful way for married couples to boost their retirement savings, ensuring both partners benefit from tax-advantaged investment growth even if one spouse does not have earned income. For more details on IRA rules and retirement planning, see related articles like Individual Retirement Account (IRA) and Retirement Savings.

Additional Resources

By understanding and utilizing spousal IRA rules, couples can strengthen their financial future and improve their retirement readiness together.