Find out all you need to know about a Spousal IRA, if you want to fund your wife or husband’s retirement plan. With this option, you will be able to protect your retirement nest egg. Couples with a nonworking spouse can open an account to make sure they retire without stress.
All You Need To Know About Spousal IRA
Who Can Make A Spousal IRA?
Married couples who file taxes jointly can open a Spousal IRA to secure a nonworking partner’s retirement plan. This way, an employed or an income-generating spouse can make contributions for his or her partner, with limited or no income.
What You’ll Need To Start Contributing To A Spousal IRA?
Before you open your wife or husband’s Spousal IRA account, you need to make sure that you meet the following criteria:
- You must be lawfully married.
- A joint income tax return must be filed.
- You must earn enough to fund both yours and your partner’s IRA account.
If you meet all of the criteria, then you can fund your spouse’s IRA.
When Can You Start Contributing To A Spousal IRA?
If you choose to use a Traditional IRA, couples can get started with a retirement plan as long as they haven’t reached 70 and a half years old during the year of contribution. Roth IRAs don’t have an age limit.
Where Will You Open An Account?
Unlike other checking or savings account, a Spousal IRA cannot be opened jointly. This account must be in your wife or husband’s name and with their tax identification number. You also need to make cash or check deposits. Funds and stocks are not recognized as legitimate payment for IRAs. Your custodian will manage yours and your Spousal IRA for you; just make sure you keep all the records whenever you make or deposit your contribution.
Your custodian will file your IRA contribution for the current year unless you indicate a specific year for it. Likewise, you don’t have to pay an entire year’s contribution at once. If you can’t pay the full amount at one time, contribute in smaller amounts, until you’ve completed the goal or reached the limit.
Why Do You Need To Make IRA Contributions For Your Spouse?
Unless both of you work or have enough income to fund your own IRA individually, it’s ideal to open a Spousal IRA for your partner. If he or she has limited income, it’s highly unlikely that an IRA would be within budget. If you open a Spousal IRA, you can secure both yours and your partner’s retirement plans. It’s always smart to plan for the future.
How Can You Start Your Spousal IRA Contributions?
If you have an employer-sponsored plan, you can include your spouse in your IRA contributions. However, the amount you put into your spouse’s IRA will depend on your income, and tax-filing reports. If you file your own taxes and have your own business, then you can decide how much to contribute to the Spousal IRA.
Mail or deposit your contributions for the IRA you establish for the tax year, to your custodian on or before April 15th of the next year. Save the receipts as proof that you have made or sent the payment on time. If you’ve already filed that current year’s tax income report, you can still contribute to your IRA. Just make sure you do so before the April 15th deadline.
If you or your spouse has limited or no income at all, considering a Spousal IRA could help secure your retirement in the future. Starting your IRA early would be an advantage as well. Talk to your custodian, for a more thorough discussion, about all your IRA options.
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