Can My Spouse Contribute to a Roth IRA If She Doesn’t Work? Yes, Here’s How!

So you want to know if your spouse who doesn’t work can still save for retirement through a Roth IRA? The good news is that they can! They can build their retirement nest egg with something called a “spousal IRA.” “.

As someone who has helped many couples save the most for retirement, I can say that spousal IRAs are a great way to get ready for the future. Let’s talk about everything you need to know about this useful tool for planning your retirement.

What is a Spousal IRA?

As the name suggests, a spousal IRA is just an IRA that a working spouse funds for a non-working spouse. This rule lets married couples save twice as much for retirement, even if only one spouse works.

The great thing about spousal IRAs is that they follow the same rules as regular IRAs – they can be either traditional or Roth, and they offer the same tax advantages The key difference is just who’s funding the account.

Eligibility Requirements for Spousal IRAs

To contribute to a spousal IRA, you must meet these requirements:

• Be legally married and file a joint tax return
• At least one spouse must have eligible compensation (wages, salaries, tips, commissions, self-employment income, etc.)
• The working spouse must earn enough to cover both IRA contributions

It’s important to remember that the income of the working spouse must be at least equal to the total amount of money put into both IRAs.

Contribution Limits for 2024

For 2024, each spouse can contribute:

• $7,000 per year if under age 50
• $8,000 per year if age 50 or older (includes $1,000 “catch-up” contribution)

This means a married couple could potentially contribute up to $14,000 combined ($16,000 if both are 50+) to their respective IRAs, even if only one spouse works!

Remember that these limits apply to the total contributions across all your IRAs. So if you have both a traditional and Roth IRA, your combined contributions to both accounts can’t exceed the annual limit.

Income Limits for Roth IRAs

While anyone can contribute to a traditional IRA regardless of income, Roth IRAs do have income limitations:

For 2024, married couples filing jointly:

• Can contribute the full amount if their modified adjusted gross income (MAGI) is below $230,000
• Can make partial contributions if their MAGI is between $230,000 and $240,000
• Cannot contribute if their MAGI exceeds $240,000

If your income is too high for Roth contributions, you could still consider contributing to a traditional IRA and possibly converting it to a Roth later (the “backdoor Roth” strategy).

Traditional vs. Roth IRA: Which to Choose?

When deciding between a traditional and Roth IRA for your spouse, consider these key differences:

Traditional IRA:

• Contributions may be tax-deductible now
• Earnings grow tax-deferred
• Withdrawals in retirement are taxed as ordinary income
• No income limits for contributions (though deductibility may be limited)

Roth IRA:

• No tax deduction for contributions
• Earnings grow tax-free
• Qualified withdrawals in retirement are completely tax-free
• Income limits apply for contributions

For many non-working spouses, a Roth IRA is particularly attractive because:

1. The tax-free growth and withdrawals provide significant long-term benefits
2. It provides tax diversification in retirement if the working spouse has a traditional 401(k)
3. There are no required minimum distributions during the owner’s lifetime

Real-World Example

Let me share a quick example to make this clearer:

Tony earns $100,000 in 2024, while his wife Rosa stays home to care for their children. Even though Rosa has zero earned income, she can still contribute up to $7,000 to her own IRA (or $8,000 if she’s 50+) because Tony’s income more than covers both of their potential IRA contributions.

If they have a joint AGI under $230,000, Rosa can choose either a traditional or Roth IRA, or split her contribution between both types.

Important Rules to Remember

Here are some additional rules you should know about spousal IRAs:

• No joint accounts: IRAs must be held individually. Each spouse needs their own separate account.
• Contribution deadline: You have until the tax filing deadline (typically April 15) to make IRA contributions for the previous year.
• Specify the tax year: When making contributions, be sure to specify which tax year the contribution applies to.
• Deductibility of traditional IRAs: If the working spouse participates in an employer retirement plan, the deductibility of traditional IRA contributions may be limited based on income.

Why Spousal IRAs Are So Valuable

Spousal IRAs are particularly valuable for couples where one spouse has taken time away from the workforce to:

• Raise children
• Care for elderly parents
• Pursue education
• Manage the household

The COVID-19 pandemic led millions of workers, particularly women with families, to drop out of the workforce. Spousal IRAs provide a way for these individuals to continue building retirement savings despite not having access to an employer’s retirement plan.

How to Set Up a Spousal IRA

Setting up a spousal IRA is simple:

1. Choose a financial institution (bank, broker, or robo-advisor)
2. Select either a traditional or Roth IRA
3. Complete the application process
4. Fund the account

Most financial institutions make this process straightforward, and you can typically open an account online in just a few minutes.

What Can a Spousal IRA Invest In?

Your investment options for a spousal IRA are the same as with any IRA. These include:

• Mutual funds
• Exchange-traded funds (ETFs)
• Individual stocks and bonds
• CDs and money market funds
• And more

I generally recommend a diversified portfolio appropriate for your spouse’s age and risk tolerance, with a focus on low-cost index funds for long-term growth.

Common Questions About Spousal IRAs

Q: Can my spouse contribute to an IRA if she works part-time?
A: Yes! If your spouse earns some income but less than the annual contribution limit, she can contribute up to the actual amount she earned or the annual limit, whichever is less. The spousal IRA rules would only come into play if her earnings were less than the maximum contribution amount.

Q: Do we need to open a special “spousal IRA”?
A: Nope! There’s no special account type called a “spousal IRA” – it’s just a regular IRA (either traditional or Roth) that’s funded under the spousal contribution rules.

Q: Can I contribute to my spouse’s existing IRA?
A: Yes, you can contribute to an existing IRA. The “spousal” aspect simply refers to the rule that allows the contribution based on your income, not a special type of account.

Q: What happens if we get divorced?
A: After a divorce, the IRA remains the property of the spouse in whose name it was established. However, IRAs may be divided as part of a divorce settlement.

The Bottom Line

Spousal IRAs are a powerful but often overlooked retirement planning tool that allows non-working spouses to build their own retirement savings. By taking advantage of this provision, married couples can significantly boost their combined retirement nest egg, even when only one spouse works.

The key takeaways:

• Yes, your spouse CAN contribute to a Roth IRA even without earned income
• You must file taxes jointly and have enough earned income between you
• For 2024, contribution limits are $7,000 (under 50) or $8,000 (50+)
• Income limits apply for Roth IRA eligibility
• Each spouse must have their own individual IRA

Don’t let your spouse’s employment status prevent them from saving for retirement! With spousal IRAs, both partners can prepare for a secure financial future together.