Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations.
Generally, you can’t contribute to an individual retirement account (IRA) unless you earn an income in a given year. The spousal IRA, however, is an exception to this rule. If one spouse works and the other spouse has zero earned income, the working spouse is allowed to contribute double the normal limits to an IRA on behalf of their non-working spouse with a spousal IRA.
How Spousal IRAs Work
A spousal IRA is the common name for the IRS rules that permits a spouse who doesn’t work or earn income to fund an individual retirement account. There is no special type of IRA for spouses, instead the rule allows non-working spouses to contribute to a traditional IRA or a Roth IRA—provided they file a joint tax return with their working spouse.
Individual retirement accounts opened under the spousal IRA rules are not co-owned. The working spouse and the non-working spouse each have IRAs under their own names—accounts that were opened before the couple were married, while they were married and both working, or one that the non-working spouse opened when he or she was not working but covered by the IRS’ spousal IRA rules.
Spousal IRAs have the same annual contribution limits as any other IRA: $6,000 per individual in 2021, or $7,000 for people who are age 50 or older. Under the spousal IRA rules, a couple where only one spouse works can contribute up to $12,000 per year, $13,000 if one spouse is 50 or older, or $14,000 if both are 50 or older. Each person may only contribute to their own accounts up to the annual IRA contribution limit.
Spousal IRA Example
Here’s an example of how spousal IRA rules work in practice. Jessie and Alex are both 40, and each of them opened and funded their own Roth IRAs before they got married. Now Alex stays home to care for the couple’s two young children while Jessie makes around $100,000 a year.
Thanks to Jessie’s generous salary, the couple is planning to save $12,000 in their IRAs for tax year 2021. They plan to split their contributions evenly between their two Roth IRA accounts, $6,000 a piece. Note that Jessie cannot contribute more than $6,000 to their own IRA because of the spousal IRA rules. The second $6,000 must go to Alex’s account, which Alex wholly owns.
Spousal IRA Rules
There are a number of important rules to remember about spousal IRAs:
- The account owner does not change, no matter who funds the account. When contributing to spousal IRAs, each spouse remains the named account owner of their IRA, independent of where the contributions come from. Decisions about asset allocation, beneficiaries and withdrawals belong solely to the spouse who owns the IRA.
- Married couples must file a joint tax return to be eligible. Couples who file their taxes separately are not eligible for spousal IRA contributions.
- Total marital income is considered for Roth IRA contribution limits. Direct contributions to a Roth IRA are limited by maximum income thresholds—contributing to spousal IRA raises the Roth IRA threshold for a couple. A married couple with a modified adjusted gross income (MAGI) of up to $198,000 in 2021 is eligible to contribute the full amount to each of their Roth IRAs. Couples with MAGI of $198,000 to $208,000 can make partial Roth IRA contributions.
- There is no age limit on spousal IRA contributions. As long as at least one member of the couple is earning income, you can contribute to your IRA no matter how old you are.
Spousal IRA Tax Deductions
Traditional IRA tax deduction rules are the same for a spousal IRA. Remember: Roth IRA contributions cannot be deducted from your taxes as they offer tax-free withdrawals in retirement instead.
For married couples with only one income earning spouse, the amount that can be deducted from your taxes depends on whether the working spouse is covered by a retirement plan at work. If that spouse is not covered by a workplace retirement plan, then you may deduct the full amount of your IRA contributions from your taxes.
If the income earning spouse is covered by a workplace retirement plan, then couples earning up to $198,000 in 2021 can deduct the full amount, those earning between $198,000 and $208,000 may deduct a partial amount, and those earning north of $208,000 in 2021 may not deduct their IRA contributions at all.
Note: If your income is too high for a Roth IRA and you cannot deduct your traditional IRA contributions, consider a backdoor Roth IRA to help your retirement dollars grow in a more tax-efficient way.
How to Open a Spousal IRA
Opening an IRA is a simple process. Nearly any brokerage or robo-advisor offers both IRAs and Roth IRAs that you can open for yourself or for your spouse. Stick to a broker or company that you trust and that has a long, solid history.
You will need to provide some basic personal information, such as the account holder’s name, birthdate, and Social Security number. Once the account has been set up, you’ll be ready to start funding the spousal IRA and building a solid foundation for your joint retirement.
Related: How To Save For Retirement