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What Is a Spousal IRA? Rules and Income Limits

Brad Chastain Director of Education U.S. Money Reserve

Written by Brad Chastain

Oct 20, 2023

An individual retirement account (IRA) is a financial tool used by millions of people to save money for the years after they are done working. But what if you don’t work outside the home? What if you’re a spouse who decided to focus on taking care of your home and children?

There are multiple types of IRAs, one of which is known as a spousal IRA. It’s an option for married couples that provides benefits for homemaking spouses. Since marital status can impact retirement accounts , it’s important to know which type of IRA will be the most advantageous for both spouses.

Keep reading to get a better idea of how spousal IRAs work, spousal IRA rules, and the different types of IRAs that can benefit a homemaking spouse (which the IRA and retirement plans refer to as a “nonworking spouse”).

What Is a Nonworking Spouse ?

First, it’s important to understand who qualifies as a nonworking spouse and what could affect that status, as it can impact a spousal IRA. A “nonworking spouse” is someone who is legally married and isn’t employed or earning an income. A spouse who is retired and not earning an income is also considered nonworking.

Should the person become employed, even if it’s just part-time, they would no longer be considered nonworking. This includes working as a freelancer, independent consultant, or starting up their own business from which they receive income.

How Spousal IRAs Work

A spousal IRA is actually a term that’s commonly used to describe a set of IRS rules that allow nonworking spouses to have their own individual retirement account. When a married couple owns a regular IRA, rules limit annual contributions that are made together. A spousal IRA allows a nonworking spouse to save for retirement with a separate IRA, effectively doubling what the married couple can contribute annually, with a few caveats.

With a spousal IRA, the working spouse makes contributions to the account that is in the nonworking spouse’s name. There are not special types of IRAs for a nonworking spouse. As long as the IRA isn’t co-owned by the spouses and the spousal IRA rules are followed, a nonworking spouse can have a traditional or Roth IRA of their own.

Which Spouse Opens a Spousal IRA?

Either spouse can open a spousal IRA in their own name. The IRA can be opened prior to marriage, while married with both spouses working, or while married when one spouse is not working. However, if one spouse is currently nonworking, the working spouse must be the one to open the spousal IRA.

Either spouse can open a spousal IRA in their own name. The IRA can be opened prior to marriage, while married with both spouses working, or while married when one spouse is not working. However, if one spouse is currently nonworking, the working spouse must be the one to open the spousal IRA.

Types of Spousal IRAs: What Is the Difference Between a Traditional IRA and a Roth IRA?

As mentioned already, spousal IRAs aren’t a unique type of IRA but rather a set of rules that allows for a nonworking spouse to own an IRA. The rules can be applied to any kind of IRA, including Traditional IRAs and Roth IRAs . There are some key differences between the two types of IRA that married couples may wish to be aware of before opening a spousal IRA.

Spousal Traditional IRA

Traditional IRAs don’t have income limitations, but there is an age limit for making contributions. Once the account holder is 73 years old, they can no longer make contributions and must begin taking required minimum distributions (RMDs). While contributions can be made, these are tax-deductible and come with tax-deferred growth.

Spousal Roth IRA

A spousal Roth IRA has slightly different stipulations. There is no age limit for making contributions, but there are income limits for eligibility. And while contributions aren’t tax-deductible, the growth within the account is tax-free, and there’s no requirement that the account owner take distributions at any point. A beneficiary of a Roth IRA, however, will be required to take RMDs.

Spousal Precious Metals IRA

Another option—and one that may offer expanded asset options and control—is a precious metals IRA. With this type of IRA, alternative assets such as physical gold and silver can be included as part of the account portfolio. It’s also a self-directed IRA, which means the account holder is able to select the assets, and all transactions are performed at the sole direction of the account holder.

There are many nuances to the regulations for Traditional and Roth IRAs, and the regulations are subject to change. If you aren’t sure which type of IRA would work best for your financial and marital situation, a financial consultant may be able to explain your options in more detail.

What are the Rules for a Spousal IRA?

There are several spousal IRA rules that come into play, just as with standard individual retirement accounts. There are rules for spousal IRAs regarding taxes, income, contributions, and deductions.

It may be beneficial to fully understand spousal IRA rules because there could be penalties or tax fines if the rules aren’t followed, resulting in your not being able to take full advantage of all possible benefits. If you’re unclear on any of the rules provided below, a financial advisor may be able to explain them in more detail before you open an individual retirement account.

Spousal IRA Income Limits

Spousal IRAs have income limits. The working spouse must make enough money to cover contributions to both IRAs. There are also income limits connected to annual contribution amounts if you decide to open a spousal Roth IRA. Currently, there aren’t any income limits for Traditional IRA contributions, but income can affect tax deductions on the contributions that are made.

Spousal IRA Contribution Rules

You must be eligible to open, own, and contribute to a spousal IRA, which means some rules apply. The spousal IRA contribution rules are as follows:

  • There’s no age limit for making contributions to a spousal IRA so long as the working spouse is earning an income.
  • If the nonworking spouse is retired, IRA contributions can be made after retirement if their spouse is still earning an income.
  • Annual contribution limits are determined by age, with different limits based on whether the IRA owner is over or under 50 years of age.
  • The total contributions for all IRAs can’t exceed the amount of taxable income on the joint tax filing .
  • A Roth IRA must be held at least five years before withdrawals can be made tax-free.

Spousal IRA Contribution Limits vs. Deduction Limits

With an IRA, there are contribution limits and deduction limits . Contribution limits refer to how much money can be put into the IRA within a year. Tax deduction limits are applied to Traditional IRA contributions. Roth IRA contributions aren’t tax-deductible, so limitations don’t apply.

Contribution limits and deduction limits apply on an annual basis and can change from year to year. It may be helpful to check with the IRS, a financial consultant, or a tax advisor to determine your current contribution and deduction limits.

Spousal Roth IRA and Traditional IRA Contribution Limits

Any Traditional IRA or Roth IRA has annual contribution limits, and spousal IRAs are no exception. The contribution limit in 2023 for any Traditional or Roth IRA is $6,500 a year for those under 50 years of age and $7,500 a year for anyone 50 years of age or older.

The working or nonworking spouse can contribute to the spousal IRA. Contributions to the spousal IRA by the nonworking spouse can be as much as the contributions made by the working spouse.

Income could be a factor in determining the contribution limit. With any type of IRA, if the working spouse earns less than the contribution limit, then contributions can’t exceed the taxable income amount. For example, if the working spouse is over 50 but earns $12,000 a year, then the maximum total contributions that can be made to the two IRAs is $12,000, not $15,000.

There are additional income-related contribution limitations with Roth IRAs. Married couples that file jointly can contribute the full amount to a spousal IRA if their modified Adjusted Gross Income (AGI) is under $218,000. The contribution limit is reduced if their modified AGI is between $218,000 and $228,000. In tax years where the AGI exceeds $228,000, no contributions can be made to spousal IRA accounts.

Spousal IRA Rules for Tax Deduction Benefits

One of the reasons IRAs are popular ways to save for retirement is because they come with tax benefits. Contributions to a Traditional IRA are tax-deductible, but income can limit tax deductions on a spousal Traditional IRA. The income limits are based on whether the working spouse takes part in a retirement plan through work.

Working Spouse Doesn’t Participate in a Retirement Plan Through Work
If the working spouse doesn’t have a retirement plan through work, then the deduction limits are much higher for married couples that file jointly. Married couples can deduct the full amount that is contributed to a Traditional IRA for the year if modified AGI is $204,000 or less. A partial tax deduction is given to married couples making between $204,000 and $214,000. No tax deductions are given if the modified AGI is over $214,000.

Working Spouse Participates in a Retirement Plan Through Work
If the working spouse participates in a retirement plan through work, there’s a lower threshold for deduction limits. A married couple that files jointly can get a full deduction of the total contributions if the modified AGI is $109,000 or less. Married couples receive a partial deduction if the modified AGI is between $109,000 and $129,000. No deduction is given for higher incomes.

Other Spousal IRA Rules

A few other key spousal IRA rules must be followed in addition to the regulations already noted:

  • The spousal IRA cannot be co-owned. It must belong solely to the nonworking spouse and be in their name.
  • The owner of the IRA will not change regardless of who contributes to the account.
  • The working and nonworking spouses must file a joint tax return together.

Is it a Good Idea to Have a Spousal IRA?

For many married couples, opening a spousal IRA may make sense if one person is considered “nonworking.” Some married couples use spousal IRAs as a financial strategy to effectively double the amount that can be contributed to IRAs compared to having a single, shared individual retirement account. In doing so, the couple can increase their retirement savings collectively.

The nonworking spouse will also be able to decide which assets to include in their spousal IRA. This means a married couple could have the added benefit of better portfolio diversification if the separate IRAs include different types of assets.

A spousal IRA can be highly advantageous for the nonworking spouse because it provides financial control. As the sole owner of the spousal IRA, the nonworking spouse gets to name the beneficiaries and make decisions about withdrawals from the account. Even if the working spouse contributed all of the funds, only the nonworking spouse will have access to manage a spousal IRA.

How Precious Metals Can Fit Into a Spousal IRA Strategy

If a married couple is interested in portfolio diversification, opting for a spousal precious metals IRA could be a viable solution. With a self-directed precious metals IRA, the account owner, whether it’s the working or nonworking spouse, has a wider range of assets that can be included, such as physical precious metals like gold and silver.

Purchasing precious metals has many benefits, one of which is that precious metals have an impressive track record of growth potential. Some financial advisors consider precious metals to be a safeguard against inflation because market prices of the metals aren’t directly tied to the dollar. As the dollar falls, gold’s purchasing power may hold steady or even increase. Precious metals also aren’t as susceptible to shifts in financial markets and downturns in the economy when compared to some other asset classes.

If you’re in the process of establishing a spousal IRA and would like to know more, you can request a free IRA Information Kit . The kit has a wealth of information about how to set up a self-directed precious metals IRA and begin leveraging alternative assets.


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