Judging by the name, many people assume that the Spousal IRA is another type of IRA. However, the Spousal IRA is best described as a strategy that allows a non-working or lower-earning spouse to contribute to a Traditional IRA or Roth IRA while using the working spouse’s income.
Requirements to Implement a Spousal IRA
For this strategy to work, the working spouse must:
✅ Have earned income equal to or greater than the combined IRA contributions.
✅ File jointly (Married Filing Jointly) to contribute to a Spousal IRA.
📌 Important Note:
Restrictions may apply for Roth IRA contributions and Traditional IRA deductions if the working spouse's income exceeds the limit or if they have a workplace retirement plan. The non-working spouse can contribute to a Traditional IRA or Roth IRA, depending on eligibility.
How the Spousal IRA Works
Since the Spousal IRA is just a strategy and not an actual IRA type, all guidelines and limitations directly correlate with those of the Traditional IRA and Roth IRA.
📌 Below is a breakdown of the two options:
Traditional Spousal IRA
✅ Contributions may be tax-deductible, depending on income and filing status.
✅ Withdrawals are taxed as ordinary income in retirement.
Roth Spousal IRA
✅ Contributions are not tax-deductible but grow tax-free.
✅ Withdrawals of earnings are tax- and penalty-free after age 59½, if the account has been open for at least five years.
Is the Spousal IRA Right for You?
If you have a married counterpart who is non-working or earns a low salary (which may limit their max yearly contribution), the Spousal IRA may be a great way to take advantage of IRA contributions.
💡 This strategy ensures that both spouses can save for retirement, even if one does not have earned income.