Summary

A spousal IRA offers married couples a way to boost retirement savings, even if one spouse doesn’t earn an income. This type of account allows the working spouse to contribute to an IRA in the name of the nonworking spouse, helping both partners prepare for retirement. While it follows standard IRA rules, specific guidelines apply regarding income, contributions, and ownership.

💡 What Is a Spousal IRA?

A spousal IRA is not a special type of retirement account but rather a strategy that allows a married couple to maximize their retirement savings when one spouse has little or no earned income. Typically, individuals need earned income to contribute to an IRA. However, spousal IRAs are an exception, letting the working spouse contribute to an IRA opened in the nonworking spouse's name. These can be either traditional or Roth IRAs, depending on eligibility and tax preferences. The key is that the couple must file taxes jointly, and the working spouse must earn enough to cover contributions for both partners' IRAs.

Takeaways:

• A spousal IRA allows contributions for a nonworking spouse.

• It uses standard traditional or Roth IRA accounts.

• Couples must file taxes as “married filing jointly.”

• Contribution limits apply: $7,000 per person in 2025 ($8,000 if age 50+).

Key Terms

• Spousal IRA: An IRA funded by a working spouse for a nonworking spouse.

• Traditional IRA: A retirement account offering potential tax-deductible contributions and tax-deferred growth.

• Roth IRA: A retirement account with after-tax contributions and tax-free withdrawals in retirement.

• Contribution Limit: The maximum amount that can be added to an IRA each year.

🚀 How Spousal IRAs Work and Key Rules

For a spousal IRA to be used, couples need to meet certain criteria. First, they must file their taxes jointly. The working spouse must also earn at least the total amount contributed across both IRAs. For 2025, each spouse can contribute up to $7,000 annually, or $8,000 if they are 50 or older. This means a couple could potentially set aside $14,000 to $16,000 each year toward retirement, depending on age. It’s important to note that a spousal IRA is owned solely by the nonworking spouse—there’s no joint ownership. Additionally, both traditional and Roth IRA rules regarding income limits and contribution eligibility still apply. There are no age limits for making contributions, giving couples flexibility in their retirement planning.

Takeaways:

• Couples must meet joint filing status and income requirements.

• The IRA is individually owned by the nonworking spouse.

• Both traditional and Roth IRA rules apply, including income limits.

• No age restrictions exist for contributions.

Key Terms

• Married Filing Jointly: A tax status required to contribute to a spousal IRA.

• Earned Income: Income from employment or self-employment used to fund IRA contributions.

• Income Limits: Thresholds that may reduce or eliminate eligibility for Roth IRA contributions or traditional IRA deductions.

🛠️ How to Open a Spousal IRA

Opening a spousal IRA is straightforward because it’s simply a standard IRA account in the nonworking spouse’s name. You can open one through most financial institutions, including brokers and robo-advisors. The process involves providing personal information like a birth date and Social Security number. Once the account is set up, the couple can begin funding it, keeping contribution limits in mind. After funding, selecting appropriate investments is the next step. Consistent contributions, even modest ones, can grow significantly over time thanks to compound returns. For instance, contributing $500 monthly with a 6% annual return could result in over $330,000 after 25 years, illustrating the long-term value of starting early and staying consistent.

Takeaways:

• A spousal IRA can be opened at most brokers or robo-advisors.

• Standard personal information is required to open the account.

• Regular contributions and smart investing can lead to substantial growth over time.

Key Terms

• Robo-Advisor: An automated platform that manages investments based on algorithms.

• Compound Returns: Growth achieved when investment earnings generate their own earnings over time.

• Investment Return: The gain or loss on an investment over a period.

Conclusion

A spousal IRA provides a practical way for married couples to enhance their retirement savings, even when one spouse doesn’t have earned income. By understanding the rules, contribution limits, and how to open and manage the account, couples can take advantage of this opportunity to build a more secure financial future together.