The fundamental rule of IRAs is that you must have earned income to contribute. This seemingly penalizes stay-at-home parents or non-working spouses. Enter the Spousal IRA.
How the Spousal IRA Works
A "Spousal IRA" is not a separate type of account; it is simply a rule. The IRS allows a working spouse to contribute to a Traditional or Roth IRA in the name of the non-working spouse.
This effectively doubles a family's retirement savings capacity. Instead of maxing out at $7,500 for the working spouse, the family can contribute a total of $15,000 ($7,500 to the working spouse's IRA, and $7,500 to the non-working spouse's IRA).
The Requirements
- You must be married and file a joint tax return.
- The working spouse must have enough earned income to cover both contributions (e.g., if you contribute a total of $15,000, the working spouse must have earned at least $15,000 that year).
Account Ownership
It is vital to understand that IRAs are INDIVIDUAL retirement accounts. There are no joint IRAs. The account funded by the working spouse for the non-working spouse is legally owned solely by the non-working spouse.