Saving for the future is often hard—especially when only one spouse is working. The non-employed spouse doesn’t have the same built-in retirement savings opportunities the working spouse has.
That’s when a Spousal IRA makes sense. It’s an account in the non-working spouse’s name, and couples can contribute to it up to the maximum allowable.
Choose a Traditional or a Roth IRA. Get the same features and benefits.
It’s a simple and sensible way for each of you to save for your retirement.
Your spouse earns less than the maximum allowable annual IRA contribution in yearly wages.
Eligibility Requirements:
Traditional IRA:
You and your spouse must file a joint return.
The contribution may be deductible if one spouse isn’t an active participant in an employer-sponsored retirement plan.
Non-working spouses in whose name the Spousal IRA is created can’t have reached age 70 ½ (contributing spouses can be older, but then can no longer contribute to their own IRA).
Roth IRA:
You and your spouse must file a joint return.
Your Adjusted Gross Income (AGI) must be less than $160,000.
As long as the working spouse qualifies, he or she can continue to make contributions even after the non-working spouse reaches 70 ½ years of age.
Contribution Limits:
$4,000 or 100% of earned compensation, whichever is less, for the years 2005-2007
$5,000 for the year 2008 and beyond, with potential cost of living adjustment (COLA) increases in $500 increments beginning in 2009
No more than the maximum annual limit may be contributed between a Traditional and a Roth IRA combined.
For people age 50+, an additional “Catch-up Contribution” is allowed:
2004-2005: $500
2006 and beyond: $1,000
Withdrawal Guidelines1:
Traditional IRA:
Minimum distributions of funds are required at age 70 ½.
IRS penalty-free withdrawal events include:
Buying a first home ($10,000 lifetime cap)
Qualifying expenses: education, medical, health insurance (if unemployed)
Reaching age 59 ½
Incurring a disability
Equal periodic payments for life
IRS Tax Levy
Death
Roth IRA:
No required minimum distributions at age 70 ½—you can leave the account intact for heirs, complete with all the tax-free earning benefits.
IRS penalty-free withdrawal for amounts withdrawn after 5 years if one of the following occurs:
