An individual retirement account (IRA) must be established and maintained in only one individual’s name. A married couple both can't participate in the same IRA. However, the IRA owner can designate a spouse or other person as a beneficiary of the account's assets. In addition, spousal IRA rules allow one spouse to contribute to the IRA of a partner with little or no income, so that both may take advantage of the maximum contribution limits.

Key Takeaways

  • Individual retirement accounts (IRAs) must be solely in one person's name. Married couples cannot share an account.
  • However, an IRA owner can name a spouse as the beneficiary of their retirement account.
  • Even if only one spouse earns an income, both spouses can have separate IRAs in each of their names by establishing a spousal IRA.

Naming a Spouse as Beneficiary

Although an IRA owner cannot jointly hold an account with a spouse, they can designate their spouse or other individuals as their IRA's beneficiary. Certain states require the spouse to provide written consent if the IRA owner wishes to designate a non-spouse as the beneficiary. For this reason, it is vitally important to periodically review beneficiary designations to determine if any updates or changes are required.

Creating a Spousal IRA

Spouses can create IRAs in their own respective names, even if only one of the spouses in question generates an income. They may accomplish this by relying on a vehicle known as a spousal IRA, which lets a working spouse contribute funds to an IRA in the name of the non-working spouse. Spousal IRAs effectively allow married couples to maximize their retirement contributions when one partner may earn little or no income.

To qualify for spousal IRAs, couples must satisfy the following mandates:

  • They must file a joint income tax return for the year in which the spousal IRA is created.
  • They must demonstrate an earned income or other eligible compensation that either equals or exceeds the total amount of the collective contributions made to the two IRAs.

For 2020, there is no age limit on who can contribute to a traditional IRA. For 2019, there is an age limit of 70½ for traditional IRA contributions and no age limit for Roth IRA contributions. The age limits on traditional IRA contributions were repealed by Setting Every Community Up for Retirement Enhancement (SECURE) Act, which has prompted sweeping changes across the retirement planning landscape.

As long as they have sufficient earned income, a couple can fund both of their IRAs to the allowable maximums for that year. In 2019 and 2020, for example, the maximum is $6,000 for anyone under the age of 50 and $7,000 for those 50 years of age and over. Consequently, depending on their ages, a couple may contribute as much as $14,000 to their two IRAs, effectively doubling their retirement savings for the year.

Spouses may fund both of their IRAs to the maximum collective allowable capacity, if at least one individual earned that amount of income, or more, for the year.

Spousal IRAs demand that participants maintain a keen knowledge of the rules pertaining to tax deductions for traditional IRA contributions, as well as income limits for Roth IRA eligibility.  This will help individuals gauge the tax impact of the decisions that factor into their broad retirement planning goals. 

Advisor Insight

Theodore E. Saade, CFP®, AIF®, CMFC
Signature Estate & Investment Advisors LLC, Los Angeles, CA

An IRA cannot be held jointly by spouses. It can only be held in one individual’s name.

But one workaround, depending on what you’re trying to accomplish, would be to appoint the accountholder’s spouse their power of attorney. When triggered, a limited power of attorney would authorize the spouse to make trades within the account; a full power of attorney would allow the spouse to make withdrawals and transfers from the account as well.

You should check with the brokerage firm that is the custodian of your IRA to see if it can accommodate a power of attorneyship; it may require you to fill out a proprietary authorization form.