Can my spouse contribute to a retirement account if he or she doesn’t work?
Spousal IRA’s are a tremendous way to maximize tax deferred growth for the entire family because the less you have to pay on your investment gains, the better your investments will perform over the long run. One can contribute the lesser of earned income or the annual allowed contribution to their IRA. Furthermore, employed individuals who are married may also contribute to an IRA for their spouse. Specifically, the amount of the combined contributions can’t be more than the taxable compensation reported on the joint return.
Here at Geier Asset Management, we recommend that all married individuals with qualified income contribute to an IRA. You and your spouse may both be able to contribute to either a Roth IRA or a Traditional IRA.
If your income is above certain limits your ability to contribute to a spousal Roth IRA is phased out, and you may only contribute to a Traditional IRA. Unlike Roth IRA’s, Traditional IRA’s have no income limits for a spousal contribution. Often making both contributions by the time taxes are due can be a strain on cash flow. One strategy that we recommend is making joint contributions monthly so that by April both IRA’s have been fully funded. Put simply, it’s always easier to save incrementally than all at once!
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