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How a Spousal IRA Works

Kimberly Lankford

You don't have to stop saving for retirement just because you stopped working. Your husband or wife can contribute to an account for you.



I left my job earlier this year to stay at home with my 2-year-old daughter and have been worrying about what I can do to save for retirement because I can no longer contribute to a 401(k). Is there anything else I can do to save instead?

As long as you earned at least $4,000 in 2007, then you can contribute up to $4,000 to an IRA. And if you didn't earn that much before you left your job but your husband has earned income, then he can contribute up to $4,000 this year ($5,000 if you're 50 or older) into a spousal IRA for you and into an account for himself.

Your husband must earn at least as much as he contributes to both accounts, which means that you'll both be able to contribute the maximum as long as he earns at least $8,000 in 2007.

The spousal account can be either a traditional or Roth IRA. To qualify for a Roth, however, the adjusted gross income on your joint return must be less than $166,000 in 2007 (the contribution amount is limited if your joint income is $156,000 or higher).

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And don't forget about spousal IRAs if one spouse has retired and the other still works. If you're 50 or older, you can each contribute up to $5,000 to an IRA for 2007 as long as one of you earns at least $10,000 for the year.

You should consider a Roth if you qualify because you'll be able to make contributions at any age and won't need to make required minimum distributions at age 70½, as you do with a traditional IRA. Plus, your heirs will inherit any remaining money income-tax free.

For more information about IRAs, see Everything You Need to Know about IRAs.

Got a question? Ask Kim at askkim@kiplinger.com.



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