A gift wrapped in Tiffany blue may be hard to resist, but a gift that contributes to retirement dreams is even better.

 

A Spousal IRA is a perfect gift to show appreciation for a stay-at-home partner and increase retirement savings.

 

“You just stay at home?”  People often fail to recognize the critical value of the partner who steps out of a career to care for children or support the other’s business launch or climb up the career ladder.

 

Spouses, however, can recognize each other and add to their retirement savings by setting up a Spousal IRA (The Kay Bailey Hutchison Spousal IRA).

 

A spousal IRA gives a stay-at-home spouse equal footing to invest for retirement. A spousal IRA is a separate IRA set up in the spouse's name and social security number, belonging exclusively to that spouse. It is an exception to the IRS rule requiring earned income to contribute to an IRA.*

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Put simply, if your spouse does not work outside the home, you may be able to set up a separate IRA (not name as a beneficiary of your IRA) based on your taxable compensation. The contribution may even be deductible.

To qualify, you must be legally married and filing a joint tax return.

 

While the maximum annual contribution of $5,500 ($6,500 for investors age 50 or older) may not seem like much, it is a lot fewer calories than chocolate and can make a real difference in your joint retirement savings over time.  

 

Spousal IRAs are a valuable retirement savings tool. They are simple to establish, and simple to fund. There is no special reporting to the IRS, and if you make a spousal contribution into a plan one year and your spouse returns to work the next year a regular contribution can be made into the same plan.  A Spousal IRA may be either a traditional or Roth IRA, and there is no requirement for spouses to contribute to the same type of IRA.

 

Other IRS IRA rules apply, including contribution thresholds ($5,500 each for 2015), income thresholds to fully fund a Roth (MAGI below $183K), and age restrictions for traditional IRA contributions (you must not be 70 ½ or older).

 

*Spousal IRAs

If you file a joint tax return, you may be able to contribute to an IRA even if you did not have taxable compensation as long as your spouse did. The amount of your combined contributions can’t be more than the taxable compensation reported on your joint return. See the formula in IRS Publication 590-A.  If neither spouse participated in a retirement plan at work, all of your contributions will be deductible.

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