Spousal IRA’s are unique. They allow a working spouse to make IRA contributions for a spouse who doesn’t work or doesn’t have enough earned income to make individual IRA contributions. There are some specific rules and requirements, but they help stay-at-home moms (and others) continue building a retirement nest egg. So, what are the guidelines for spousal IRA contributions?
The spousal IRA contributions must meet specific contribution rules:
- The maximum contribution amount for 2017 and 2018, for IRA and Roth accounts combined, is $5,500 if you are under the age of 50 and $6,500 for those age 50 and over.
- Contributions cannot be in stocks or other assets but in cash equivalents.
- April 15th of the current year is the deadline to make contributions for a prior year.
- A deceased spouse cannot receive contributions.
- When the IRA owner is contributing to an employer plan, he/she can still receive spousal contributions.
There are certain rules for IRA accounts only:
- Beginning the year the account owner turns 70½, they can no longer receive spousal contributions.
- The combined income of both spouses, whether one is covered by an employer sponsored plan, and which is covered, decided if spousal contributions are deductible.
Rules for Roth IRA accounts only:
- Income limits and phase out ranges for making Roth IRA contributions apply.
- There is no deduction for a Roth IRA contribution on your taxes (all after-tax)
Key requirements to meet:
- Spouses must be legally married and file a joint federal tax return. This includes same-sex couples.
- The spouse receiving the contribution must have no compensation, or less compensation, than the spouse making the contribution on their behalf.
- The IRA account is held in the name of the spouse for whom the contribution is made. When Debra is the working spouse and she makes contributions for Sam, the IRA account must be in Sam’s name. Sam has complete control over his IRA account. He can name his own beneficiaries, invest the funds as he wishes, and take withdrawals whenever he wants even though the actual money put into the account came from Debra’s income.
Just make sure you understand there are rules and limitations to consider when thinking about a spousal IRA account.