Help a Non-Working Spouse Save Money for Retirement With a Spouse’s IRA
Generally, individual retirement accounts (IRAs) can only be funded from earned income. So if you’re unemployed, it’s kind of a bummer. However, there is a loophole if you are unemployed and married: create a spousal IRA.
A spousal IRA is simply a traditional Rota IRA opened in the name of a non-working spouse, as Forbes points out. This allows couples to get around the rules by allowing a working spouse to contribute on behalf of a non-working spouse.
Forbes explains:
A spousal IRA is very similar to a regular IRA, except that it is opened in the name of an unemployed spouse. To be eligible, you must be married, file taxes together, and pay an amount equal to or less than the combined annual income of you and your spouse … This is why this is a good idea: when saving for an IRA retirement The couple can reduce their taxable income by the amount of the spouse’s IRA contributions. In 2015, the maximum IRA contribution is $ 5,500, and if you are 50 or older, $ 6,500. This is also true for spousal IRAs. Any profit in your account will not be taxed until you retire.
As Pied Fool explains, this essentially saves you twice as much on retirement . Contribution limits are $ 5,500 per person, so each party can save up to that amount from a one-time income. Read more in the full Forbes post below. The Motley Fool provides some additional details here .
How to help your unemployed spouse save money for retirement | Forbes