Can I open a traditional IRA or Roth IRA for a spouse who doesn't work?
Since the contribution limit is only $5,500 a year for IRA's, I'm contemplating opening a Roth IRA for my wife so that we can contribute a total of $11,000 a year. Am I able to do that even though she has no income?
Yes, you can contribute to a spousal IRA for her. Stay-at-home parents, retirees with a spouse who is still working, and others who were unemployed for the year but had a spouse who earned an income can benefit from tax-advantaged retirement savings.
The working spouse may contribute up to $5,500 to his or her own IRA and up to $5,500 for the nonworking spouse as long as the working spouse’s annual income was at least as much as the combined contributions. You can add an extra $1,000 for each spouse who is age 50 or older with the catch-up contributions.
Also, in order to take advantage of this situation you not only have to be married, but your tax filing status must be “married filing jointly.” You cannot make a spousal contribution to an IRA if you are filing separately.
You absolutely can, as long as you earn enough income to cover that $11k contribution. It doesn’t matter if one spouse is working or staying-at-home. One word of caution, both traditional IRA and Roth IRA have different restrictions. For 2017, when your AGI (Adjusted Gross income) is below $99k, you can fully deduct the $11k contribution you made to the traditional IRA. When the AGI is between $99k and $119k, you can do a partial deduction. Above $119k, there’s no deduction when make the contributions to the traditional IRA.
As for the Roth IRA, you can make the $11k Roth contribution if your AGI is below $186k. Once above $196k, you’re ineligible to make any direct Roth contribution.
You may wonder which one works best for you. Depending your urgency—upfront tax deduction or tax-free withdrawal at the retirement, you can choose one or the other. If you’re not sure about your future income, why not do both, alternating between the traditional and Roth from year to year? Best!
You can open either a traditional IRA or a Roth IRA if your spouse doesn't work. There are several requirements for doing so. You must be married and file a joint tax return. And you must have earned income equal to or more than the amount you are contributing to the IRAs. The total annual contribution to each IRA is $5,500 ($6,500 if you are over 50).
Contributions to traditional IRAs may be made up to the age of 70 1/2. That's the age when Required Minimum Distributions begin. There is no age limit for Roth IRAs, but no withdrawals are allowed until five years after January 1st of the year in which the first contribution was made. There are no required minimum distributions from Roth IRAs.
Withdrawals from traditional IRAs are taxed at ordinary income tax rates. Withdrawals from Roth IRAs are tax-free.
Keep in mind that Roth IRAs are funded by aftertax money so the actual pretax cost will be higher than that of a traditional IRA.
So the answer to your question is Yes and your "real" contributions will actually be higher if you choose to open a Roth IRA for your wife.
You absolutely can open and fund a Traditional or Roth (or split the $5500 contribution between the two), in addition to yourr, as long as you have at least $11,000 in earned income between the two of you.
This is a great way to boost your savings and use your wife's ability to contribute even though she has no earned income. She will basically used your earned income to contribute to her IRA.
Good luck and great thinking!
Yes, you can. As long as you file a joint return, you can contribute up to the lesser of your joint taxable income and the annual IRA contribution limit between you and your spouse’s IRA. The annual IRA contribution limits apply to separate accounts established in you and your spouse’s name, respectively.
This is informally referred to as a Spousal IRA. However, establishing the account for the non-income-earning spouse is no different than if they were earning income; so don’t spend too much time looking for forms titled “Spousal IRA.”