For married couples, if one spouse is unemployed or busy with the daily grind of unpaid care and domestic work, it can be challenging to save as much as you need to enjoy a comfortable retirement. This can feel stressful, but you do have options.
Generally, an IRA (Individual Retirement Account) contribution is only allowed if a taxpayer earns monetary compensation, however, there is an exception for a “spousal” IRA. This exception allows contributions to be made for a spouse who stays at home to care for children and/or elderly relatives or who is out of work.
This exception is applicable as long as the couple files a joint tax return.
In 2023, the amount that an eligible married couple can contribute to an IRA for their nonworking spouse is $6,500. This is the same limit that applies to the working spouse.
The benefits of an IRA
IRAs offer two crucial advantages for taxpayers who make contributions to them:
Contributions of up to $6,500 a year to a traditional IRA might be tax deductible, and the earnings on funds within the IRA aren’t taxed until the funds are withdrawn.
Aside from this, you can make contributions to a Roth IRA. There’s no tax deduction for Roth IRA contributions, but if specific requirements are met, your future distributions are tax-free.
If the married couple has a combined earned income of at least $13,000, $6,500 can be paid into an IRA for each partner, creating a total of $13,000.
Contributions for both spouses can be made to either a regular IRA or a Roth IRA or split between them, as long as their combined contributions don’t go over the $13,000 limit.
Higher contribution if 50 or older
Additionally, taxpayers who are age 50 or older can make “catch-up” contributions to an IRA or Roth IRA amounting to $1,000. That means that, for 2023, a taxpayer and their spouse (who have both reached age 50 by the end of the year) can each make a deductible contribution to an IRA of up to $7,500, for a combined deductible limit of $15,000.
With that said, it’s important to note that there are some limitations.
For example, if in 2023 a working spouse is an active participant in one of many kinds of retirement plans, a deductible contribution of up to $6,500 (or $7,500 for a spouse who will be 50 by the end of the year) can be made to the IRA of the non-working spouse only if the couple’s AGI doesn’t exceed a specific threshold. This limit is phased out for AGI between $218,000 and $228,000.
Have questions? Smolin can help
If you’re unsure of how to approach setting up IRA contributions for your non-working spouse, or you need help planning your retirement, contact the professionals at Smolin, and we’ll walk you through this process.