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Spouses and IRAs

Chances are, you are actively saving and investing using a retirement account through your employer. But what options does your spouse have for their own retirement savings?

If they do not have access to an employer-sponsored plan, many spouses save through a Traditional or Roth Individual Retirement Account (IRA). While both types of IRAs are helpful retirement saving vehicles, the choice of IRA type most likely depends on the owner’s overall tax strategy.

Contributions to a Traditional IRA can offset federal income taxes owed and may potentially increase a tax refund while Roth IRAs carry the attractive feature of qualified distributions being tax-free. The contribution limits for each are substantial, and if you’re over age 50, you’re even allowed higher limits for “catch-up contributions.”

Regardless of your income, and regardless of your spouse’s income, everyone needs to set aside money for retirement. IRAs can help shore up your family’s retirement planning.

GuideStone’s Top Questions about Spousal IRAs:

My spouse works outside the home, but her/his employer does not offer a retirement plan at work. Can she or he still open an IRA?
Absolutely. IRAs were established to promote savings, supplement retirement income and lessen the dependence on Social Security. Anyone with earned income (including income earned by their spouse) can establish an IRA.

Should we open a Traditional IRA or a Roth IRA for my spouse? The most significant difference involves the tax treatment on contributions and earnings.

Contributions to a Traditional IRA may or may not be tax-deductible upfront, depending on your income level. Regardless, you will pay taxes on the distributions of Traditional IRAs when you withdraw the money at retirement. Investors of any income level may open a Traditional IRA.

For Roth IRAs, contributions are not tax-deductible, but there are no taxes on principal or earnings when withdrawn as a qualified withdrawal. There are also income restrictions regarding eligibility.

Use our Roth vs. Traditional IRA Calculator to help determine which contribution might be more advantageous for your spouse and you.

Why should we set aside money in my spouse’s name for retirement? Wouldn’t it make more sense to increase my retirement plan contributions?
It depends on how your employer designed your retirement plan. Do you have matching in place — and are you taking full advantage? Are your investment options sufficient? Are you a minister for tax purposes and eligible to claim housing allowance during retirement? Evaluate these things as you decide to open an IRA or not.

It’s important to note that you can set money aside in an IRA in addition to your retirement plan contributions. Theoretically, you could have an employer-sponsored plan AND an IRA in your name, and your spouse could have his or her IRA in their name, too. This scenario may be especially helpful if you are close to maximizing your employer-sponsored plan’s contribution limits.

Additionally, some people choose to designate a non-working spouse’s retirement account to generate income for nonessentials during retirement, like travel, while using a working spouse’s retirement account to provide primary necessities and discretionary expenses.

What happens if my spouse inherits my IRA or even another retirement account? Read more here.

Quick Recap:

  • Spouses can save for retirement, too, through a Traditional or Roth IRA.
  • Choosing an IRA type depends on the IRA owner’s overall tax strategy.
  • Account holders can use IRAs to save for both retirement essentials and discretionary expenses.

Is your spouse ready to open an IRA?

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This should not be considered tax advice. You should consult a tax professional to discuss your unique situation.

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