As a stay-at-home parent, you might think saving for retirement isn’t an option for you. But there is good news: you can still save for retirement even though you are not the main breadwinner. This is possible with two magic words: spouse IRA.
Are you a stay-at-home mom wondering if you can still build your retirement nest egg? I’ve got amazing news for ya – the answer is YES! Even without bringing in a traditional paycheck, you can absolutely contribute to a Roth IRA Let’s dive into how this works and why it might be one of the smartest financial moves you’ll ever make
The Magic Words: Spousal IRA
As a stay-at-home mom myself for several years, I remember the frustration of feeling like I couldn’t contribute to our family’s financial future in a tangible way. Then I discovered the spousal IRA – and it changed everything!
A spousal IRA isn’t actually a special type of account – it’s just a regular IRA (either traditional or Roth) that’s opened in the name of a non-working spouse. The beautiful part? You don’t need to earn income yourself to contribute to it!
How a Spousal IRA Works
Here’s the deal – normally, you need earned income to contribute to any retirement account. But the IRS makes this wonderful exception for married couples where one spouse doesn’t work outside the home.
To qualify for a spousal IRA:
- You must be legally married
- You must file a joint tax return
- Your working spouse must earn enough income to cover contributions to BOTH of your IRAs
That’s it! No complicated hoops to jump through.
Roth IRA vs. Traditional IRA: Which Should Stay-at-Home Moms Choose?
When setting up your spousal IRA, you’ll need to choose between a traditional or Roth IRA. Both have their advantages, but for many stay-at-home parents, a Roth IRA offers some compelling benefits:
| Traditional IRA | Roth IRA |
|---|---|
| Tax deduction now | No tax deduction now |
| Pay taxes when you withdraw | Tax-free withdrawals in retirement |
| Required minimum distributions at 73 | No required distributions |
| Early withdrawals generally penalized | Can withdraw contributions anytime |
As the Motley Fool article pointed out, Roth IRAs make the most sense if you expect your tax bracket to stay the same or rise in retirement. If you anticipate being in a significantly lower tax bracket when you retire, a traditional IRA might work better.
I like the Roth option better because taxes are taken care of right away, so I don’t have to worry about them later. When you retire, that money in your Roth IRA is ALL YOURS!
How Much Can a Stay-at-Home Mom Contribute to a Roth IRA?
For 2023, you can contribute up to $6,500 to a Roth IRA (or $7,500 if you’re 50 or older). This limit applies to both you and your spouse individually.
But there is a catch: your partner has to make enough money to cover both of your costs. Your spouse would have to make at least $13,000 a year ($15,000 if both of you are over 50) if you both want to max out your IRAs.
There are also income limits for Roth IRA eligibility, so check with a financial advisor if your household income is on the higher end.
Real Talk: Finding Money to Invest When You’re on One Income
Being honest, it’s not always easy to invest extra money when you only make one income. Yes, I understand. It can be hard to save money when you have to pay for diapers, food, and other things your kids need.
The Ramsey Solutions article suggests aiming to invest 15% of your total household income toward retirement for both spouses. If your household income is $60,000, that means investing $9,000 annually or about $750 monthly.
Here are two ways you could divide that investment:
Option 1: All Retirement Savings in Working Spouse’s Name
- Contribute enough to get the full employer match in spouse’s 401(k)
- Max out a Roth IRA in working spouse’s name
- Put any remaining retirement funds back in the 401(k)
Option 2: Split Retirement Savings Between Both Spouses
- Contribute enough to get the full employer match in working spouse’s 401(k)
- Split the remaining retirement funds between two Roth IRAs – one for each of you
Option 2 has a huge advantage – more of your retirement money ends up in tax-advantaged Roth accounts!
Why Every Stay-at-Home Mom Should Have Her Own Retirement Account
A lot of stay-at-home moms have told me they feel like they’re not making enough money for the family. That’s not true at all! You are very valuable to your family as a caregiver, housekeeper, and CEO.
Still, having a retirement account in your own name can be incredibly empowering. Here’s why:
1. Financial Independence
A retirement account in your name gives you a sense of ownership over your financial future. As one investment professional quoted in the Ramsey article said about his wife, “Having an IRA in her own name helps her see that she’s building wealth on her own.”
2. Financial Security
While we don’t like to think about it, divorce and widowhood are realities that affect many women. Having your own retirement account provides a financial safety net if something unexpected happens.
3. Tax Advantages
By splitting retirement savings between two Roth IRAs instead of putting everything in a traditional 401(k), more of your nest egg grows tax-free. That means more money for you in retirement!
4. Equal Partnership
When both spouses have retirement accounts, it reinforces that you’re equal partners working toward shared financial goals. Your family’s money isn’t “his” and “hers” – it’s “ours.”
How to Get Started with Your Spousal Roth IRA
Ready to open your own spousal Roth IRA? Here’s how to get started:
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Talk with your spouse about your retirement goals and how much you can afford to invest each month.
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Choose a brokerage firm to open your Roth IRA. Popular options include Vanguard, Fidelity, Charles Schwab, and many others.
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Complete the paperwork to open your account. You’ll need basic information like your Social Security number and birth date.
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Set up automatic contributions if possible. Even small, consistent investments add up over time!
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Choose your investments. Most brokerages offer target-date funds that automatically adjust your investment mix as you get closer to retirement.
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Check income limits. Make sure your household income doesn’t exceed the limits for Roth IRA contributions.
A Special Note About Ownership of Spousal IRAs
One important thing to understand – funds in a spousal IRA belong solely to the person whose name is on the account, even if the couple later divorces. This is actually a good thing for stay-at-home moms, as it ensures you retain control of the retirement assets you’ve built up while caring for your family.
Don’t Let Being a Stay-at-Home Mom Stop You From Saving for Retirement
Being a stay-at-home parent is arguably the most important job on the planet. You work 24/7 with no vacation days or sick leave! Just because you don’t receive a traditional paycheck doesn’t mean you can’t or shouldn’t be planning for your financial future.
A spousal IRA – especially a Roth IRA – is a fantastic way to ensure you’re building wealth alongside your spouse while enjoying the immeasurable rewards of being present for your children’s daily lives.
I encourage every stay-at-home mom to have this conversation with your spouse. Your future self will thank you for it!
Have you opened a spousal IRA? What questions do you have about retirement planning as a stay-at-home mom? Drop them in the comments below, and I’ll do my best to help!
Disclaimer: This article provides general guidelines about investing topics. Your situation may be unique. To discuss a plan for your specific situation, consider connecting with a financial advisor.
The Spousal IRA: No Personal Income Needed
First, let’s be clear: When you’re married, it’s not his and hers money anymore, folks. It’s our money, and you should be working toward a shared financial dream. But what about the nonworking spouse who wants to feel more empowered about contributing to the financial goal?.
This isn’t uncommon. Take Rich P. for example, an investment professional in Albany, New York. Rich’s wife has been a stay-at-home mom for 27 years. “I wouldn’t trade it for the world,” he says. “The fruit it produces is amazing. “.
But no matter how hard Rich’s wife worked to keep the household running, one concern kept popping up.
“My wife would feel like she wasn’t contributing enough,” he says. That’s because she was looking at it from a purely financial standpoint. “My wife and I think of the money I make as ours, but she feels like she can’t spend it. “.
Rich realized setting up a spousal IRA could help his wife feel more empowered. “Having an IRA in her own name helps her see that she’s building her own wealth,” he says.
Simply put, a spousal IRA enables a stay-at-home husband or wife to set up a retirement account in their own name. As long as one person in your household brings home a paycheck and you file a joint tax return, you’re good to go!.
When setting up a spousal IRA, you have a choice between a traditional and a Roth IRA.
- A traditional IRA works much like a 401(k). The money you invest is tax-deferred, which means you don’t have to pay taxes on it until you take it out.
- With a Roth IRA, you put money in after taxes, so your investment grows tax-free. When you retire, you can keep any money in a Roth IRA.
We recommend the Roth option because once you take care of the taxes up front, you don’t have to worry about them later on—which saves you more money. You can contribute up to $6,000 ($7,000 if you’re 50 or older) to a Roth IRA this year.1 But there are some income limits—so check with an investment professional to make sure this can work for your situation.
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Breaking Down a Spousal IRA
Where does all this investing money come from if you don’t get paid for all your hard work as a stay-at-home parent? We suggest putting 15% of your total household income toward retirement. If your spouse brings in 100% of your household income, then it’s just a matter of how you allocate that 15%.
If your household income is $60,000 a year, you should invest $9,000 a year—or $750 a month—toward retirement for both of you. Here are two ways you could break that investment down.
Should a Stay at Home Parent Open a Roth IRA?
FAQ
Can I contribute to a Roth IRA if I’m not working?
No, you can’t contribute to a Roth IRA unless you have earned income. You can open a regular brokerage account.
Can a homemaker contribute to a Roth IRA?
For 2021, the most a spouse who doesn’t work or makes low wages can put into a traditional or Roth IRA (or a mix of the two) is $6,000, the same amount as a spouse who does work.
What disqualifies you from contributing to a Roth IRA?
You cannot contribute to a Roth IRA if you do not have earned income, or if your Modified Adjusted Gross Income (MAGI) exceeds the IRS income limit, which varies by filing status.
Can I put babysitting money into Roth IRA?
Put your child’s earnings to work Activities like babysitting, petsitting, or mowing lawns can qualify a minor for Roth IRA contributions. Keep in mind that Medicare and Social Security taxes can apply in some situations, so it’s best to talk to a tax expert.
Can a stay-at-home parent contribute to an IRA?
Say you and your spouse both make $120,000 a year and your spouse stays home with the kids. You can each put money into your own IRAs using your earned income. If you want, you can give a gift to someone for him to then contribute to his IRA.
Can a spousal IRA help a stay-at-home parent save for retirement?
As a stay-at-home parent, you might think saving for retirement isn’t an option for you. But we’ve got some great news: Just because you aren’t the primary breadwinner doesn’t mean you can’t save for retirement thanks to two magic words— spousal IRA. We’ll show you how!
Can a spousal IRA be opened in a stay-at-home spouse?
But the government makes one exception to this rule in the form of a spousal IRA. This is a regular IRA, either traditional or Roth, opened in the name of a stay-at-home spouse. You can save money there, as long as your partner earns at least enough income to cover contributions made to the spousal IRA and their own retirement accounts.
Can a spousal IRA be opened if you’re not earning income?
Generally, you’re not allowed to contribute to a retirement account if you aren’t earning income yourself. But the government makes one exception to this rule in the form of a spousal IRA. This is a regular IRA, either traditional or Roth, opened in the name of a stay-at-home spouse.
Can you save money on a spousal IRA?
You can save money there, as long as your partner earns at least enough income to cover contributions made to the spousal IRA and their own retirement accounts. For example, let’s say that you and your spouse both hope to max out your IRAs this year. That means contributing about $6,500 if you’re under 50 or $7,500 if you’re 50 or older.
Can a spousal IRA be a Roth IRA?
When setting up a spousal IRA, you have a choice between a traditional and a Roth IRA. A traditional IRA works much like a 401 (k). It’s tax-deferred, which means you don’t pay taxes on the money you invest until you withdraw it. A Roth IRA uses after-tax dollars, so your investment grows tax-free.