What Is a Spousal Roth IRA?

Spousal Roth IRAs Explained

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A spousal Roth IRA is an individual retirement account that belongs to a non-income earning spouse. Because the IRS requires IRA contributions from taxable income, a non-earning spouse would otherwise be unable to contribute to a Roth IRA. The Spousal Roth IRA is an exception that allows non-earning spouses to deposit to a tax-advantaged retirement account with tax-free distributions later on. 

A non-income earning investor must be married and file joint taxes with their spouse to qualify for a spousal Roth IRA. Before you open one, it's important to learn how they work, ways they differ from traditional IRAs, and the conditions that apply to married investors.

Definition and Example of a Spousal Roth IRA

A spousal Roth IRA acts as a typical Roth IRA except that it is set up for a married investor who doesn’t earn taxable income. Because the IRS only allows investors to use qualified income for both Roth and traditional IRAs, non-working spouses would otherwise be unable to contribute to an IRA.

With qualifying income within the IRA contribution limits—up to $6,000 a year for investors under 50 years old, or $7,000 annually for those 50 and above—a spousal Roth IRA can be a great way for married couples to make the most of two retirement accounts instead of just one.

Just like a typical Roth IRA account, investors can contribute after-tax income up to the specified limits, but the amount the earning spouse contributes cannot exceed the amount of taxable income earned that year. 

For example, if 51-year-old Rick decides to open a spousal Roth IRA for his stay-at-home wife Susan, the same age, to complement his own Roth IRA, they can add money to the account using Rick’s after-tax income up to $14,000. So if Susan wants to contribute $7,000 to her spousal Roth IRA, she can do so as long as Rick has earned at least that much in qualified income (more on that below).

How Does a Spousal Roth IRA Work?

A spousal Roth IRA is essentially the same as a Roth IRA, but the spousal Roth IRA is for the benefit of a spouse who does not earn qualified income. For this situation, the IRS requires spousal Roth IRA owners to be married and file taxes jointly with a spouse. Married investors who file taxes separately won’t qualify for the spousal exception.

Investors can contribute the following qualified income to a spousal Roth IRA:

  • Wages and salaries
  • Commissions, tips, and bonuses
  • Self-employment income
  • taxable non-tuition fellowship and stipend payments
  • nontaxable combat pay
  • taxable alimony and separate maintenance

This would exclude property earnings or income from pensions, interest, or dividends. In addition, large earners who make more than $203,999 a year are subject to reduced contributions or may not qualify for IRA contributions at all.

Because there is no age requirement for distribution, spousal Roth IRAs allow older investors a chance to continue to maximize their nest egg as long as contributions are from earned income. 

Annual contribution limits apply to all IRAs in your name, so you may need to split contributions between accounts. If you have a traditional IRA and a Roth IRA, the maximum you can contribute between both accounts is $6,000 if you’re under 50 years old.

Spousal Roth IRA vs. Spousal Traditional IRA

The spousal exception applies to both Roth IRAs and traditional IRAs. The fundamental difference between the two is when you receive the tax break.

“For investors, the biggest deciding factor between a Roth IRA vs a traditional IRA is the current and future income tax brackets of the client,” Zachary A. Bachner, CFP, told The Balance by email. “If an investor's tax bracket is lower now than in retirement, the Roth IRA is the better option. But if they expect to be in a lower tax bracket in retirement, then the traditional IRA typically makes more sense.” 

Investors won’t get the upfront tax deductions with a spousal Roth IRA that they would with a traditional IRA. However, foregoing your tax deduction now to save on tax costs later is one of the benefits of having a Roth IRA. 

  Spousal Roth IRA Spousal Traditional IRA
Tax Advantage No deductions on contributions; distributions are tax-free Contributions are tax deductible if you quality; distributions are taxable income
Contribution limits $6,000 under 50 years old; $7,000 for 50 and over $6,000 under 50 years old, $7,000 for 50 and over
Distribution Requirements None; withdrawals can be made as early as age 59½ Must start at age 72; withdrawals can be made as early as age 59½
Maximum Income limits Investors with a modified AGI over $203,999 are restricted to reduced or zero dollar contributions Investors with a modified AGI of $109,000 or higher are restricted to reduced or zero dollar tax deductions

If you would like to contribute to a retirement account, but don't earn income, a spousal Roth IRA could be a good option. Investing for two people instead of one maximizes your savings and potentially reduces tax cost after retirement.

Key Takeaways

  • The spousal Roth IRA is an exception that allows non-earning spouses to contribute to a retirement account.
  • The spousal Roth IRA only applies to married couples who file joint taxes.
  • Spousal Roth IRA contributions can’t exceed the earning spouse’s qualified income for that year.
  • Investors can contribute up to $6,000 a year under age 50, or $7,000 for ages 50 and over, with no required minimum distribution age.

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