What Is a Spousal IRA and What Are the Rules?

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Did you know you can put aside thousands of dollars toward retirement each year through a spousal IRA even if your spouse isn’t working?

A “spousal IRA” is a fancy label, but if you’re familiar with Individual Retirement Accounts, you’ll probably find the concept to be familiar.

In this article, I’ll explain what a spousal IRA is, the rules that apply to spousal IRAs (and IRAs in general) and where you should consider opening a spousal IRA.


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What Is a Spousal IRA?

A spousal IRA allows a working wife or husband to contribute to a tax-advantaged retirement account registered in the name of a non-working (or low-income) spouse.

Spousal IRAs make it possible to set aside up to $12,000 per year in IRAs as a married couple even if one of you isn’t working. (That number rises to $14,000 total, or $7,000 each, for those age 50 and older.)

Joint IRAs don’t exist. The name “Individual Retirement Account” is quite literal. So the working spouse needs to contribute to the IRA that’s in the name of the non-working spouse.

The term “spousal IRA” isn’t the name of a product. It just describes the legal act of contributing to your spouse’s normal IRA in their stead. The non-working spouse can open an IRA before getting married, before becoming unemployed or after becoming unemployed.

Even if Spouse A is the one funding the IRA registered to Spouse B, technically, Spouse B has full control of the account. That means investing the funds, naming a beneficiary and deciding to sell or withdraw.


What Are the Spousal IRA Rules and Requirements?

Want to invest with a spousal IRA? There’s one major rule. You must be married, and you must file your taxes jointly. Otherwise? No dice.

Outside of that distinction, the rules that apply to your “regular” IRA also pertain to a spousal IRA. Here are some of those rules and requirements:

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  • Your combined MAGI (Modified Adjusted Gross Income) must be equal to or greater than the amount of money you contribute to an IRA. In other words, if you earn a combined $10,000 per year, you can’t contribute more than $10,000 total to your two IRAs.
  • Required Minimum Distributions (RMDs) and income limits for tax-deductible contributions still apply to traditional IRAs.
  • Income limits for contributions still apply to Roth IRAs. I’ll detail the income-based rules for all IRAs shortly.
  • If you haven’t contributed the maximum to your husband or wife’s account in a given year, you have until mid-April the following year to continue contributing, just as you do with your own IRA.
  • If you’re married and you file your taxes jointly with an Adjusted Gross Income of less than $68,000 in 2022, you’ll qualify for a saver’s tax credit of up to $2,000.

Roth and Traditional IRA Income Limits

Clark thinks a Roth IRA is the better choice for most people. But if you make too much money, you won’t be eligible to contribute to a Roth in 2022.

Here’s the eligibility chart for taxpayers who are married filing jointly.

Combined Taxable IncomeContribution Limit
Less than $204,000$6,000 for each spouse ($7,000 for 50+ years old)
$204,000-$214,000Contributions phased out (limit changes based on income)
More than $214,000$0

Contributions to a traditional 401(k) or IRA usually are tax-deductible.

However, sometimes traditional IRA contributions aren’t tax-deductible. Let’s say you’re married filing jointly, and the spouse making the IRA contribution has access to a retirement plan at work. The IRS gives you fairly conservative income limits before cutting off your ability to further reduce your tax bill via IRA contributions:

Combined IncomeTax Deductible?Contribution Limits
Less than $109,000Contributions are fully deductible$6,000 per individual ($7,000 for 50+ years old)
$109,000-$129,000Partially deductible (phased out based on specific income)$6,000 per individual ($7,000 for 50+ years old)
$129,001 or moreNot tax deductible$6,000 per individual ($7,000 for 50+ years old)

Now let’s say the person contributing to the spousal IRA doesn’t have access to a retirement plan at work, but their spouse does. In this case, the IRS sets the income limit a bit higher before cutting off tax-deductible contributions:

Combined IncomeTax Deductible?Contribution Limits
Up to $204,000Contributions are fully deductible$6,000 per individual ($7,000 for 50+ years old)
$204,000-$214,000Partially deductible (phased out based on specific income)$6,000 per individual ($7,000 for 50+ years old)
$214,001 or moreNot tax deductible$6,000 per individual ($7,000 for 50+ years old)

How Much Money Can a Spousal IRA Save Me for Retirement?

Think about how much money you spend every year right now. That figure is likely to go up in the future due to inflation, increased medical costs, taxes and other factors.

Contributing an extra $6,000 to a non-working spouse’s IRA each year, if you’re able to, doesn’t sound like much in that context. But making a $500 contribution every month for 30 years becomes nearly $420,000 at a conservative 5% rate of return.

After maxing out your own IRA, perhaps you only have enough money to contribute $100 per month. But let’s say you do that every month from the time you’re 25 years old until the time you’re 65. You’ll still put aside more than $150,000 at that same 5% ROI.

Putting aside a little extra money toward retirement through a spousal IRA can create a significant pile of money for you and your marriage when your working days end.


Where and How To Open a Spousal IRA

A spousal IRA is a bit of a misnomer. It isn’t a separate product. It’s just a normal Individual Retirement Account that you’re allowed to help fund if it’s in the name of your spouse and you file your taxes jointly.

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You can manage your own investment portfolio within your Roth IRA or use a robo-advisor. Clark’s favorite reason to manage your own portfolio is to avoid fees.

To that end, Charles Schwab, Fidelity and Vanguard are his three favorites for almost all things investing.anguard are his three favorites for almost all things investing.

Consider how you’re going to invest the money in your IRA before you open a new account. That way you can compare the companies you’re considering more critically.

Let’s look at Clark’s most common retirement investment recommendation, the target date fund, at all three institutions.

ProviderMinimum Target Date Fund InvestmentTypical Expense RatioGet Started
Vanguard$1,0000.12% to 0.15%Click here
Schwab$10.08%Click here
Fidelity$00.12% to 0.75%Click here

Recently, Clark says he perceives Vanguard’s customer service trending in the wrong direction, although he still recommends the institution.

A robo-advisor is a good option if you’d rather outsource your investing. Some of the best robo-advisors charge 0.25% or less per year in management fees.


Roth vs. Traditional IRAs: Clark’s Take

Clark often delights in nicknaming himself “the man from Roth.”

“I’m obsessed with the Roth as a way to save for retirement,” Clark says.

Because Roth contributions involve post-tax dollars, you can withdraw your contributions — and your earnings on those contributions — tax-free in retirement. (Your Roth account must be at least five years old before you’re eligible for tax-free withdrawals.)

Clark is adamant in his opinion that taxes will rise in the future — maybe even considerably. So unless you’re in one of the highest tax brackets today, paying your taxes now and enjoying tax-free withdrawals in retirement could be a huge financial win.

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You can go more in-depth on Roth vs. traditional IRAs, or get a better understanding of why Clark is obsessed with Roth.


Final Thoughts

If you or your spouse are the primary breadwinner, it may make sense for the two of you to use a spousal IRA.

It’s especially a good option if the spouse with the primary income doesn’t have a good 401(k) option at work or still has more money to invest after maxing out their 401(k) contributions.

“Spousal IRA” sounds like a fancy or unique product. In reality, it’s just a label to articulate that you can contribute to your husband or wife’s IRA if you file your taxes jointly.


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