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What Is a Spousal IRA – Rules, Eligibility & Benefits

If you are a stay-at-home spouse, it seems unfair that you can’t build up a retirement account in your name. After all, one of the requirements of opening an Individual Retirement Account (IRA) is that you need earned income. For those who stay home, though, this is actually a myth – and one that could cost you.

The truth is that the IRS makes an exception for married couples that want to boost their household retirement savings while providing a stay-at-home spouse the ability to build a nest egg. This arrangement is often referred to as a “spousal IRA.”

Are You Eligible for a Spousal IRA?

Many households have an arrangement in which one spouse stays at home to care for the home and children. In such cases, if you are the stay-at-home parent, you can open an IRA in your name. In fact, the “spousal IRA” is just a regular IRA. The name merely refers to the fact that the working spouse can make a contribution to an IRA held in the name of a non-working spouse.

The eligibility requirements for the spousal IRA are straightforward:

  • Marital Status: Married
  • Tax Filing Status: Married, filing jointly
  • Earnings: Contributing spouse must have compensation/earned income that amounts to at least the amount annually contributed to the non-working spouse’s IRA. If the contributing spouse also has an IRA, annual compensation/earned income must exceed the combined contributions the IRAs.
  • Age: The non-working spouse must be under 70 1/2 in the year of the contribution for a traditional IRA. There are no age restrictions on a Roth IRA for a non-working spouse.

Once you determine that you meet the eligibility requirements, it’s possible for you to open an IRA in your name and have your working spouse contribute to it.

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