Abstract: Married couples may not be able to save
as much as they need for retirement when one spouse doesn’t work outside the
home. In general, an IRA contribution is allowed only if a taxpayer earns
compensation. However, there’s an exception involving a “spousal” IRA. It
allows contributions to be made for nonworking spouses. This article explores
the details.
Nonworking
spouses may still contribute to an IRA
Married
couples may not be able to save as much as they need for retirement when one
spouse doesn’t work outside the home — perhaps so that spouse can take care of
children or elderly parents. In general, an IRA contribution is allowed only if
a taxpayer earns compensation. However, there’s an exception involving a
“spousal” IRA. It allows contributions to be made for nonworking spouses.
For
2022, the amount that an eligible married couple can contribute to an IRA for a
nonworking spouse is $6,000, which is the same limit that applies for the
working spouse.
IRA
advantages
As
you may know, traditional IRAs offer two types of advantages for taxpayers who
make contributions to them:
1.
Contributions of up to $6,000 a year
to an IRA may be tax deductible, and
As
long as the couple together has at least $12,000 of earned income, $6,000 can
be contributed to an IRA for each, for a total of $12,000. (The contributions
for both spouses can be made to either a regular IRA or a Roth IRA, or split
between them, if the combined contributions don’t exceed the $12,000 limit.)
Boost
contributions if 50 or older
In
addition, individuals who are age 50 or older can make “catch-up” contributions
to an IRA or Roth IRA in the amount of $1,000. Therefore, for 2022, for a
taxpayer and his or her spouse, both of whom will have reached age 50 by the
end of the year, the combined limit of the deductible contributions to an IRA
for each spouse is $7,000, for a combined deductible limit of $14,000.
There’s
one catch, however. Suppose in 2022, the working spouse is an active
participant in one of several types of retirement plans. In that case, a
deductible contribution of up to $6,000 (or $7,000 for a spouse who will be 50
by the end of the year) can be made to the IRA of the nonparticipant spouse, only
if the couple’s AGI doesn’t exceed $129,000.
Contact
us if you’d like more information about IRAs or you’d like to discuss
retirement planning.
© 2022