4 Reasons Your Spouse Should Open an IRA

Written by: Mike Valles

IRA’s are typically opened for the working spouse, and they cannot be opened jointly. As the name implies, Individual Retirement Accounts, they are for individuals. There are some reasons, though, why you may want to open a spousal IRA for your non-working spouse and make contributions to it.

You Can Claim Maximum Contributions for Both IRAs

Although the additional IRA must be opened only in your spouse’s name to be legal, you can claim the contribution. For a traditional IRA, this is done by deducting the amount contributed from your income up to the allowable amount for both. For the tax year 2013, the maximum allowable contribution to a single IRA is $5,000, or as much as $6,000 if the spouse is 50 or older, but younger than 70.5, if it is a traditional IRA; there are no age limits for a Roth IRA, says Investopedia.com. If you have a spousal IRA, you can make another contribution of equal size, making the maximum allowable contributions up to $11,000, says Money.USNews.com.

You cannot deduct anything for contributions made to a Roth IRA, says TRowePrice.com. If it is not in her name, you cannot claim the amount contributed to her account on a joint tax return, which is also required, says BuyandHold.com. In addition, you have to be working and receiving an income to claim the deduction.

Give Your Spouse a Retirement Income

Many non-working spouses were required to leave the workplace in order to raise a family. This was a sacrifice for the spouse, and they are unable to put any money away into a retirement account. By creating a spousal IRA, you provide her with her own retirement money, which can grow into a comfortable amount over time.

An IRA that is deductible can only be opened and deducted if both spouses do not have some kind of employer retirement plan, says 360FinancialLiteracy.com. If there is such a plan in place, there will be some limitations as to how much can be earned. The IRS says that tax deductions are only permissible for the spouse if you were not legally separated or divorced before the end of the year.

Earnings Grow Tax Free

Any earnings that are made in either type of IRA grow tax-free. This enables you to earn sizable interest over the lifetime of the IRA and only pay taxes on the amount withdrawn. Having two IRAs gives a couple twice the earning power, and lets them do it tax-free, too, until it is needed.

The Money Belongs to Your Spouse

Since the IRA has to be opened in your spouse’s name and social security number, the contributions made to the account belong to your spouse. It remains her money, and continues to build assets all the time, even if you should become divorced or separated later on.

Opening a spousal IRA can provide greater benefits to you and your spouse by allowing you to get tax breaks and build a larger nest egg for retirement. Contributions for the previous tax year can be made up until April 15th, and still be deducted if you have a traditional IRA.


4 Reasons Your Spouse Should Open an IRA

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