A spousal IRA lets a stay-at-home member of a a couple contribute the maximum amount to an individual retirement account each year. As long as you file a married filing jointly tax return and the working spouse earns enough to fund the IRA, you can make up to the maximum contribution. And it may even be deductible.
Contribution Limits for Spousal IRAs in 2013
Exactly how much you can contribute changes over time with inflation. In 2013, the limit for spousal IRAs is $5,500. If you are older than age 50 (or will be by the end of 2013), you can add another grand for a limit of $6,500. This catch-up contribution is designed to help people 50 and older accelerate their savings before retirement.
Deductibility Contribution Limits of Spousal IRA 2013
You can deduct your full contribution to a spousal IRA in 2013 if you as a couple have an adjusted gross income (AGI) of $178,000 or less. You can deduct some portion of your contribution if your AGI is between $178,000 and $188,000 in 2013. If the working spouse doesn't have a retirement plan through work, that spouse can also deduct the full amount up to the contribution limit. If that spouse does have a plan at work, deductions for contributions to the spouse's IRA phase out for AGIs between $95,000 and $115,000.
You don't have to make regular contributions to a spousal IRA throughout the year. You can make one lump contribution up until you file your taxes for that year. Meaning you have until tax day 2014 to contribute to a 2013 spousal IRA. It makes a handy last-minute deduction when you need one. But really, you should be making regular contributions every year to ensure that the nonworking spouse in your marriage has some funds to tap for income at retirement.
Self-Employed IRA Limits for 2013
If the nonworking spouse in your marriage earns some income from freelance or contracting work, you could look into a self-employed IRA. Contributions to a SIMPLE IRA max out at $12,000 in 2013, with catch-up contributions of $2,500. If you have a SEP IRA, you can contribute up to 25% of your gross income up to $51,000 in 2013.
Roth or Traditional IRA: It's Your Choice
If you prefer, you can make a contribution to a Roth IRA for your nonworking spouse. The contribution limits are the same, and there is no deduction with a Roth IRA. After-tax dollars go into a Roth IRA, and contributions and earnings are not taxed again at withdrawal. However, your eligibility for a Roth IRA phases out between $178,000 and $188,000 in 2013. Beyond that AGI, you and your spouse are ineligible for a Roth.
So show your nonworking spouse their work is valued. Contribute to a spousal IRA and help to create a more secure and comfortable retirement for you both.
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