Spousal IRA

A spousal IRA allows you to contribute to an individual retirement account for your spouse — if your spouse has little or no income. Spousal IRAs bypass the federal regulation that someone has to have earned income to contribute to an IRA.

What Is a Spousal IRA?

Generally, you can only contribute to an individual retirement account (IRA) if you have earned income. But a spousal IRA lets you get around this regulation if one spouse has little or no earned income.

Earned income includes wages, salaries, tips and other taxable income you earn.

You are eligible for a spousal IRA if you file a joint tax return and one spouse reports earned income, but the other spouse has little or no earned income.

The couple can contribute money to a spousal IRA for the partner without earned income.

Did You Know?
If neither you nor your spouse participated in a retirement plan at work, you can deduct all contributions to your IRA and a spousal IRA from your federal income tax — as long as you file jointly.

Why Consider a Spousal IRA?

In addition to the tax advantages of socking away retirement savings for a spouse, spousal IRAs can be an important part of retirement planning for a spouse outside the workforce, or a spouse who take breaks from the workforce to raise their children as stay at home parents.

This situation tends to affect women disproportionately when it comes to retirement savings. The Employment Benefits Research Institute has found that women typically have much lower average IRA balances than men have.

IRA Savings Gap Chart

Maintaining a spousal IRA can help fill in retirement savings gaps for a spouse who leaves the workforce — even if it’s only temporary.

How Does a Spousal IRA Work?

Spousal IRAs are not a special type of individual retirement account. They are standard IRAs used by someone who’s married. Both spouses can use either a traditional IRA or a Roth IRA.

If one spouse is working and the other spouse isn’t, the working spouse can contribute up to the maximum amount in his or her IRA. Then, the working spouse can contribute up to the maximum amount in the non-working spouse’s IRA.

Individual retirement accounts give you a tax break, either when you contribute or when you take money out after retirement.

Tax Breaks for Individual Retirement Accounts
Traditional IRA
Your contributions are typically tax deductible and you don’t pay taxes on your contributions or IRA earnings until you retire and withdraw money from the IRA.
Roth IRA
You have to pay income taxes on the money you contribute to a Roth IRA, but your earnings on the account and the withdrawals you make after retirement are tax-free.

You can open a spousal IRA through any bank, financial institution, mutual fund, life insurance company or stock broker that deals in IRAs. These can be in physical locations or online.

Once you set it up, you can choose assets in which you want to invest your contributions.

Contribution Limits and Regulations for Spousal IRAs

In 2021, the standard contribution limit for an individual retirement account was set at $6,000, but you can contribute as much as $7,000 if you are 50 or older. This limit applies to both traditional and Roth IRAs.

The total contributions to the working spouse’s IRA and the non-working spouse’s IRA cannot be more than the couple’s total taxable income reported in their tax return.

There are also rules on how you have to file your tax return and who owns the spousal IRA.

Spousal IRA Rules
  • A couple has to file their taxes as “married filing jointly.”
  • A non-working spouse can open a traditional or Roth IRA only if he or she qualifies based on the income limit for that IRA.
  • A spousal IRA is not owned by the couple, but by the non-working spouse named in the IRA.
  • Spousal IRAs are standard IRAs that are simply opened in the spouse’s name.
  • There are no age restrictions on contributing to a spousal IRA.

There are no income limits on how much a couple can contribute to traditional IRAs. But there are income limits the couple have to meet before setting up any Roth IRA.

In 2021, couples earning up to $198,000 can contribute the full amount allowed to both spouse’s IRAs. Those making between $198,000 and $208,000 can only make partial contributions. And couples with more than $208,000 in annual earned income cannot qualify for a Roth IRA.

Last Modified: January 7, 2021

7 Cited Research Articles

  1. Internal Revenue Service. (2020, December 4). Retirement Topics – IRA Contribution Limits. Retrieved from https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits
  2. Internal Revenue Service. (2020, November 9). What Is Earned Income? Retrieved from https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/earned-income
  3. Employee Benefits Research Institute. (2020, September 17(. EBRI IRA Database: IRA Balances, Contributions, Rollovers, Withdrawals, and Asset Allocation, 2017 Update. Retrieved from https://www.ebri.org/docs/default-source/ebri-issue-brief/ebri_ib_513_iras-17sept20.pdf?sfvrsn=a8103a2f_6
  4. Internal Revenue Service. (2020, February 24). Publication 590-A (2019), Contributions to Individual Retirement Arrangements (IRAs). Retrieved from https://www.irs.gov/publications/p590a
  5. VanDerhei, J. (2019, January 17). How Retirement Readiness Varies by Gender and Family Status: A Retirement Savings Shortfall Assessment of Gen Xers. Retrieved from https://www.ebri.org/content/how-retirement-readiness-varies-by-gender-and-family-status-a-retirement-savings-shortfall-assessment-of-gen-xers
  6. Women’s Institute for a Secure Retirement. (n.d.). Spousal IRAs. Retrieved from https://www.wiserwomen.org/fact-sheets/investment-basics-and-types/spousal-iras/
  7. FINRA. (n.d.). Individual Retirement Accounts. Retrieved from https://www.finra.org/investors/learn-to-invest/types-investments/retirement/individual-retirement-accounts