If you're married, you might be dreaming of how you'd like to spend your retirement with your loved one. But what if only one of you works? Can you still save enough to enjoy your ideal retirement? Enter in a spousal Roth IRA.
A spousal Roth IRA allows a working spouse to contribute to a Roth IRA on behalf of a nonworking spouse who has little to no income of their own. If that seems to describe your situation, here's how a spousal Roth IRA works and how you can set one up.
What is a spousal Roth IRA?
A spousal Roth IRA isn't actually a distinct account type; it's an ordinary
The nonworking spouse owns the account, and it's in their name. The account is treated as if they had funded the account with their own income. It belongs to them, and they have the authority to take distributions or make investment decisions subject to the regular Roth IRA rules.
How does a spousal Roth IRA work?
The standard rule for contributions is that you can only fund a Roth IRA if you have earned income and only up to the amount of your earned income. The
This rule makes retirement saving for couples potentially problematic if one spouse doesn't have any earned income. A spousal Roth IRA provides a convenient exception. If at least one spouse has earned income, then both spouses can contribute to a Roth IRA based on that earned income. To take advantage of this workaround, you and your spouse must file a joint tax return.
It's important to note that just because you have sufficient cash to contribute to a Roth IRA for both spouses doesn't automatically mean you can. There must be sufficient earned income to justify each spouse's contribution. Normally, this is not a problem when one spouse has steady, regular employment. However, this may not be a good option if your or your spouse's income consists largely of unearned income, such as ordinary dividends, capital gains, Social Security benefits or pension payments.
Are there income limits for a spousal Roth IRA?
Yes. You must meet annual income limits to be able to contribute to a Roth IRA. Spousal Roth IRA income limits are the same. There's a lower income limit and an upper income limit. If you exceed the lower limit, your contribution is reduced. If your income is over the upper limit, you aren't able to contribute to a Roth IRA at all for the year.
Filing status | 2023 maximum modified adjusted gross income (MAGI) to contribute to a Roth IRA | 2024 maximum modified adjusted gross income (MAGI) to contribute to a Roth IRA |
Single or head of household | $138,000-$153,000 | $146,000-$161,000 |
Married filing jointly | $218,000-$228,000 | $230,00-$240,000 |
Married filing separately | $0-$10,000 | $0-$10,000 |
These income limits apply to Roth IRAs but not to
What are the benefits of a spousal Roth IRA?
Because there are limits to how much any individual can contribute to an IRA each year, spousal IRAs allow you and your spouse to double your annual contribution. Over time, this additional contribution can significantly impact your retirement readiness.
2023 & 2024 IRA contribution limits:
- 2023: $6,500 ($7,500 if age 50 or older)
- 2024: $7,000 ($8,000 if age 50 or older)
A significant advantage that a Roth account is that distributions in retirement aren't taxable if you're 59½ and have and the account for at least
In addition to the potential tax savings, qualified Roth IRA withdrawals don't increase the amount of your or your spouse's
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