Contributing to a spousal individual retirement account (IRA) is a way for married couples to build a bigger retirement nest egg, even if only one spouse is currently employed. Individuals without income from jobs generally can't contribute to tax-advantaged retirement accounts, such as IRAs, because they don't have "eligible" compensation. However, there is an exception for married, non-working individuals whose spouses are employed, as long as they both meet certain requirements. Here is what you need to know.
- If one spouse has eligible compensation, that spouse can fund an IRA for the non-employed spouse as well as their own IRA.
- Traditional and Roth IRAs have the same contribution limits but different eligibility requirements.
- Each spouse's IRA must be held separately. IRAs cannot be held jointly.
Eligibility for Spousal IRA Contributions
If you are the working spouse and want to make an IRA contribution for your non-working spouse, you must:
- Have eligible compensation of at least the total spousal IRA contribution, plus your own IRA contribution—if any. For IRA contribution purposes, eligible compensation includes wages, salaries, tips, commissions, nontaxable combat pay, and income from self-employment.
- File a joint income-tax return with your spouse.
There are no longer any age limits on making IRA contributions. (At one time traditional IRAs had such limits, but that changed in 2019.)
It might be worth keeping in mind, however, that Roth IRA account owners must have had a Roth for at least five years in order for their withdrawals to be tax-free. This will generally not be an issue for younger taxpayers, but older ones may want to plan accordingly.
Contribution Limits for Traditional and Roth IRAs
For 2022, the individual contribution limit for both traditional and Roth IRAs is the lesser of:
- $6,000 a year for individuals under age 50 as of the end of the year and $7,000 for anyone 50 or older, or
- 100% of eligible compensation
You can contribute those amounts to both your and your spouse's IRAs, for up to a maximum of $14,000 if both of you are 50 or over.
Note that those are the total amounts you can contribute for the year, regardless of how many IRAs you have. For example, if you have both a traditional and a Roth IRA, you could split $6,000 between the two, putting $3,000 in each.
There is no income cap on your eligibility to make traditional IRA contributions, although people with incomes over a certain level may not be able to take a tax deduction for their contributions. These rules are explained in IRS Publication 590-A.
However, if you want to contribute to a Roth IRA for your spouse (or yourself), there are income limits. For 2022, a married couple who file a joint tax return and have a modified adjusted gross income (MAGI) of up to $204,000 can contribute the full amount to each of their Roth IRAs.
Couples with incomes between $204,000 and $214,000 can make partial Roth contributions. If their income exceeds $214,000, they no longer qualify for Roth IRAs.
Other IRA Rules
In addition to the spousal IRA rules addressed above, there are some other relevant rules that apply to IRAs in general.
No joint accounts
Individual retirement accounts are just that: individual accounts. Unlike a checking or savings account, for example, they cannot be held as joint accounts. Instead, each spouse's IRA must be held under that spouse's name and taxpayer identification number (typically their Social Security number).
When to contribute
Your IRA contributions for the year must be deposited or mailed to the financial institution you have chosen as your IRA custodian or trustee by your tax-filing due date for that year, typically April 15 of the following year. (When April 15 falls on a weekend or holiday, the deadline is extended to the next business day.)
So, for example, you can make a contribution to an IRA for 2022 anytime between Jan. 1, 2022, and April 17, 2023.
Note that even if you file for an extension to complete your taxes, your IRA contributions are still due by the April deadline.
Bear in mind that you don't have to make your full contribution in one payment. Instead, you can make partial contributions throughout the year, as long as they all arrive before the April deadline.
You can also make an IRA contribution even after you have filed that year's income tax return, providing you meet the deadline.
If you mail your contributions, be sure to obtain a receipt or send them by traceable mail. You may need to provide proof of the date of mailing should your contribution reach your IRA custodian or trustee after the deadline.
Remember to specify the tax year
Finally, remember to indicate the tax year to which your contribution should be applied. IRA custodians or trustees will generally deposit your contribution for the year they receive it unless you indicate on the check or accompanying documentation that the contribution is for the previous year.
What Is a Non-Working Spouse?
A "non-working" spouse is a bit of a misnomer. It simply refers to a spouse who is not bringing home income from a job or self-employment. The spouse may be doing plenty of work caring for children or an elderly relative, maintaining a household, studying for a degree, volunteering for charity, etc. A retired spouse who no longer works for a living would also qualify.
What Can a Spousal IRA Invest In?
Your investment options for a spousal IRA are the same as for any IRA. These include mutual funds, exchange-traded funds (ETFs), individual stocks and bonds, and so forth.
What Is the Difference Between a Traditional IRA and a Roth IRA?
The primary difference between a traditional and Roth IRA is how they are taxed. With a traditional IRA, you're eligible for an upfront tax deduction for your contributions but your withdrawals will be taxed as income. With a Roth IRA, you don't receive a tax deduction, but your withdrawals can be tax-free if you follow the rules. Both types of IRA enjoy tax-deferred growth over the years (ultimately tax-free in the case of the Roth).
The Bottom Line
A spousal IRA allows a working spouse to fund an IRA for a non-working spouse, effectively doubling their retirement savings for the year. Otherwise, spousal IRAs are subject to the same rules as any traditional or Roth IRA.