spousal IRA

Example

“The spousal IRA allowed her to save $7,000 for retirement despite not working outside the home.”

Memory Tip

SPOUSAL — both partners can save for retirement even if only one works.

Why It Matters

A spousal IRA allows households where one partner does not work to still build retirement savings and take advantage of tax-deferred growth. This is crucial for families with one income earner because it helps ensure both spouses have adequate retirement funds and maximizes the total amount a household can contribute to IRAs annually.

Common Misconception

Many people believe that a non-working spouse cannot have their own IRA at all, but the spousal IRA specifically exists to allow this. The key requirement is that the working spouse must have earned income at least equal to the amount being contributed to both their own IRA and their spouse's IRA.

In Practice

Suppose Sarah works and earns 80,000 dollars per year while her husband Mark stays home with their children. In 2024, Sarah can contribute 7,000 dollars to her own traditional IRA and another 7,000 dollars to a spousal IRA in Mark's name, totaling 14,000 dollars in retirement savings for the household based on Sarah's income alone.

Etymology

IRS provision allowing non-working spouses to build retirement savings.

Common Misspellings

Related Terms

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