What is a Spousal IRA?
Saving for retirement is often easier when you have an employer plan like a 401(k). But what happens if one spouse earns income while the other stays home, works part-time, or takes a break from their career? That’s where a Spousal IRA comes in.
A Spousal IRA allows a non-working or low-earning spouse to contribute to an IRA using the working spouse’s income. It’s not a special type of IRA, but a strategy that uses either a Traditional or Roth IRA in the non-working spouse’s name. This ensures both partners can build retirement savings—even if only one earns a paycheck.
How a Spousal IRA Works
- The non-working spouse owns the IRA, even though the contributions come from the working spouse’s earnings.
- The couple must file taxes jointly.
The working spouse must earn enough taxable income to cover contributions to both spouses’ IRAs. - Contributions follow the same tax rules and limits as a Traditional and Roth IRA.
How to Open a Spousal IRA (Step-by-Step Guide)
Opening a spousal IRA can be straightforward when you know the process. Here's exactly how to get started:
Step 1: Determine the IRA Type
Choose between a Traditional IRA or a Roth IRA, considering your financial goals and tax implications.
Step 2: Select a Financial Institution
Open an account with a bank, brokerage firm, or other IRS-approved institution that offers IRAs.
Step 3: Gather Required Information
Prepare necessary personal and financial details, including Social Security numbers and employment information.
Step 4: Open the IRA
Complete the application process, ensuring the account is established in the non-working spouse's name.
Step 5: Fund the IRA
Contribute up to the annual limit ($7,000 for individuals under 50, $8,000 for those 50 and older in 2025), ensuring the total contributions do not exceed the couple’s taxable income.
Step 6: Select Investments
Choose from available investment options such as mutual funds, ETFs, or individual stocks, aligning with your retirement objectives.
Step 7: Monitor the Account
Regularly review account statements and investment performance through the financial institution's online platform.
Spousal IRA Rules & Eligibility Requirements 2025
2025 Contribution Limits for Spousal IRAs
- $7,000 per spouse (if under age 50)
- $8,000 per spouse (age 50+, including the $1,000 catch-up)
- Combined contributions can’t exceed the working spouse’s taxable compensation.
Traditional vs. Roth Spousal IRA
- Traditional IRA: Contributions may be tax-deductible now, but withdrawals are taxed in retirement.
- Roth IRA: Contributions are made after-tax, but withdrawals in retirement are tax-free (if rules are met).
Income Limits and Phase-Out Rules
Roth Spousal IRA Income Limits (for joint filers):
Traditional Spousal IRA Deductibility:
- If the working spouse has an employer plan: Deduction phases out between $126,000 and $146,000 joint income.
- If no spouse is covered by an employer plan: Full deduction is available regardless of income.
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Get startedWhen Does a Spousal IRA Make Sense?
- One spouse leaves the workforce to raise children, act as a caregiver, or study.
- The couple wants to maximize household retirement contributions.
- The non-working spouse needs an account in their own name for long-term planning.
- Using a combination of Traditional and Roth IRAs provides flexibility for withdrawals and tax planning in retirement.
Key Benefits of a Spousal IRA
- Equal savings opportunities for both partners.
- Tax advantages with either Traditional or Roth options.
- Retirement security—ensuring both partners have independent savings.
- Flexibility if one spouse’s career path changes.
Spousal IRA Limitations to Consider
- Roth IRA contributions may be phased out at higher joint incomes.
- Deductibility of Traditional IRA contributions can be limited if the working spouse has an employer retirement plan.
- Early withdrawals (before age 59½) may incur taxes and penalties.
Example: How Couples Can Use a Spousal IRA
Let’s say John earns $90,000 a year, and his spouse Sarah doesn’t work. They file jointly.
- John contributes $7,000 to his own IRA (the 2025 limit for individuals under 50).
- Sarah contributes $7,000 to her Spousal IRA, funded from John’s earned income (also within the individual limit).
- Together, they add $14,000 toward retirement savings in 2025—helping both partners build their financial future.
Opening an IRA with PensionBee
At PensionBee, we believe retirement savings should be simple and accessible for everyone. An IRA can help you consolidate your old retirement savings into one easy-to-manage account, making it simpler to track, invest, and grow your savings for the future.
With PensionBee’s award-winning retirement management platform, you can:
- Consolidate accounts into one simple plan.
- Access flexible IRA options that work for your family.
- Track your savings with transparency and ease.
Frequently Asked Questions (FAQs)
1. Can I open a spousal IRA if my spouse works part-time?
Yes, as long as your combined income is enough to cover both IRA contributions and you file taxes jointly.
2. What happens to a spousal IRA if we get divorced?
The spousal IRA remains in the non-working spouse's name and becomes their individual retirement account.
3. Can we both contribute to Roth spousal IRAs?
Yes, if your joint income is below the phase-out limits ($240,000 for 2025).
4. Do spousal IRA contributions count toward my employer's 401(k) limits?
No, IRA and 401(k) contribution limits are separate. You can maximize both.
Information contained herein has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. It is not intended as the primary basis for financial planning or investment decisions and should not be construed as advice meeting the particular investment needs of any investor. This material has been prepared for information purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Past performance is no guarantee of future results.
