A spousal individual retirement account (IRA) allows a nonworking spouse to contribute to an IRA, even the spouse has little to no earned income. Here are the basics:
- To be eligible to contribute, the couple must be legally married at tax year-end and file taxes jointly. The couple's combined earned income must equal or exceed the combined IRA contribution.
- Contributions can be made to traditional IRAs as long as the owner is under age 70.5, while there is no age limit for Roth IRAs.
- In 2013, the maximum contribution to an IRA is $5,500, with an additional $1,000 catch-up contribution for individuals age 50 and over.
- For traditional IRAs, if the working spouse is covered by a qualified retirement plan but the nonworking spouse is not, the contribution for the nonworking spouse is phased out once modified adjusted gross income (MAGI) is between $178,000 and $188,000 in 2013 and totally phased out once income exceeds $188,000. If you both have earned income equal to at least the maximum IRA contribution amount and are both covered by a qualified retirement plan, your contribution is phased out at joint MAGI between $95,000 and $115,000 in 2013. If neither of you is covered by a qualified plan, both of you can make a deductible contribution regardless of your MAGI.
- For Roth IRAs, eligibility is phased out for MAGI levels between $178,000 and $188,000 in 2013. It doesn't matter whether your spouse is covered by a qualified retirement plan at work.
Contributing to a spouse's IRA may be as beneficial to the working spouse as to the non-working spouse, since the assets are likely to be shared during retirement. Please call if you'd like to review whether you or your spouse is eligible to contribute to a spousal IRA.