If you’re married, living on a single income, and you’re on the lookout for a way to boost your retirement savings, there’s a strategy you might not have considered that could really make a difference. It’s called a spousal individual retirement account, and it might be just what you need. The good news is, it’s not too late to take advantage of it for the year 2024.
A spousal IRA allows the non-working spouse in a marriage to open a separate retirement account, either a Roth or traditional IRA. If your household income is high enough, you can max out contributions to both IRAs each year. Just remember, the deadline to contribute for 2024 is April 15.
“Spousal IRAs are a game changer for married couples looking to build retirement savings and manage their lifetime tax burden,” according to Jim Davis, a certified financial planner and partner at Aspen Wealth Management in Fort Worth, Texas.
For those navigating personal finance, it’s important to be aware of some key strategies. For example, federal workers facing layoffs might find the unemployment system overwhelmed, but other steps could still lower your 2024 tax bill or even boost your refund. In addition, tariffs from Canada and Mexico can affect consumer prices broadly.
Looking ahead to 2024, you can contribute up to $7,000 to an IRA. If you’re 50 or older, there’s an additional $1,000 catch-up contribution allowed. These contribution limits hold steady for 2025 as well. So, for older couples with adequate income, that’s potentially $8,000 per IRA that can be set aside by April 15, and they have until the next tax deadline for their 2025 contributions.
Davis adds, “For many, it’s a simple yet powerful step toward achieving long-term goals.”
To take advantage of this opportunity, you need to file your taxes jointly. Both your IRA contributions combined cannot exceed the “taxable compensation” reported on your return, according to IRS guidelines. This can apply even if one spouse doesn’t have the income to contribute to an IRA on their own for 2024.
Roth IRAs are funded with after-tax dollars, offering tax-free growth down the line, but there are income limits. On the other hand, traditional IRAs might provide some upfront tax benefits depending on your income level and if you’re also participating in a workplace retirement plan.
This approach also offers a unique chance to build retirement assets for a partner who isn’t earning an income, which Michelle Petrowski, a CFP from Being in Abundance in Phoenix, points out.
“This is a way to build retirement savings for the household CFO who might be working inside the home or is underemployed,” she explains.
Another benefit? In the unfortunate event of a divorce, it can be simpler to divide retirement accounts if the non-earning spouse has some savings in their own name, states Petrowski, who is also trained as a divorce financial analyst.
“This really helps to acknowledge the unpaid economic contributions made to the household and can help to even things out a bit during those discussions,” she concludes.
