What Is a Spousal Roth IRA?

Married couples can fund two accounts, even if just one spouse earns income.

What Is a Spousal Roth IRA?

Typically, individuals need to earn income to contribute to a traditional individual retirement account (IRA) or a Roth IRA. However, if you’re married, you can use a spousal Roth IRA to boost your retirement savings potential—even if only one spouse works for pay.

An IRA is an excellent tool for retirement savings. These accounts were introduced in the mid-1970s as a way to help workers save for retirement and lower their taxable income.

It’s no surprise, then, that you must have income from a job to contribute to—and enjoy the tax benefit—of an IRA. According to Internal Revenue Service (IRS) rules, you need to have “taxable compensation” to contribute to a traditional or a Roth IRA.

Despite that, there’s still a way for spouses to have their own IRAs, even if they don’t work for pay.

Key Takeaways

  • A spousal IRA is a type of retirement savings that allows a working spouse to contribute to an individual retirement account (IRA) in the name of a nonworking spouse.
  • Usually, an individual must have earned income, but the spousal IRA is an exception, allowing a spouse with earned income to contribute on behalf of a spouse who doesn’t work for pay.
  • A working spouse can contribute to both IRAs, provided that they have enough earned income to cover both contributions.

Understanding a Spousal IRA

A spousal IRA is a type of retirement savings strategy that allows a working spouse to contribute to an IRA in the name of a nonworking spouse. Typically, an individual must have earned income to contribute to an IRA, but the spousal IRA is an exception since the nonworking spouse can have little to no income.

What Counts as Taxable Compensation?

There are two ways to get taxable compensation: Work for someone who pays you, or own a business (or farm). Taxable compensation includes the following:

The following types of income don’t count as taxable compensation:

  • Earnings and profits from property
  • Interest and dividends from investments
  • Pension or annuity income
  • Deferred compensation
  • Income from certain partnerships
  • Any amounts that you exclude from income

Your earned income must match or exceed your IRA contribution. For 2021 and 2022, you can contribute up to $6,000 each year or $7,000 if you’re age 50 or older. So, to make the full contribution, you need at least $6,000 (or $7,000) of earned income. If you make less, you can contribute up to the amount that you earned.

If you contribute more than you’re allowed to, you’ll owe a 6% penalty each year until you fix the mistake. 

Spousal IRA Exception

You can contribute to a spousal IRA on behalf of a spouse who doesn’t have earned income. To do so, you must have enough earned income to cover both contributions. To fully contribute to both IRAs in 2021 and 2022, your earned income would have to be at least $12,000, or $14,000 if you’re both age 50 or older.

Keep in mind that IRAs are individual accounts (thus the individual in IRA). As such, a spousal IRA is not a joint account. Rather, you each have your own IRA—but just one spouse funds them both.

You must be married and file jointly to open a spousal IRA.

To take advantage of a spousal IRA, you have to be married, and your tax filing status must be married filing jointly. You can’t make a spousal contribution to an IRA if you file separately.

Benefits of a Spousal IRA

A spousal IRA is an excellent way for a spouse who doesn’t work for pay to save for retirement. Without the spousal IRA exception, spouses with no earned income could have trouble finding a tax-advantaged way to save for retirement.

If one spouse has already maxed out their own IRA contributions, it can be a great opportunity for couples to enhance their tax-advantaged retirement planning.

Your spouse can name you as the beneficiary of the spousal IRA. But once you start contributing to the account, the money is your spouse’s. This becomes important if you separate or divorce in the future.

A spousal IRA remains intact even if the spouse without earned income starts to receive pay for work. In this case, they can still contribute to the IRA, according to regular IRA rules.

Is a Spousal IRA a Traditional or Roth IRA?

A spousal IRA is an ordinary IRA set up in a spouse’s name. You can set it up as either a traditional or a Roth IRA.

The biggest difference between the two IRAs is when you get the tax break. With a traditional IRA, you deduct your contributions now and pay taxes later when you take distributions.

With Roth IRAs, however, there’s no up-front tax break. But your contributions and earnings grow tax free, and qualified distributions are also tax free. There are other differences as well. Below is a quick rundown.

Roth and Traditional IRA: Key Differences
Feature Roth IRAs Traditional IRAs
2021 & 2022 Contribution Limits $6,000, or $7,000 if you’re age 50 or older $6,000, or $7,000 if you’re age 50 or older
2021 & 2022 Income Limits High earners may not be able to make contributions High earners may not be able to deduct contributions
Tax Treatment No tax break for contributions; withdrawals are tax free in retirement Tax deduction for contributions; withdrawals taxed as ordinary income
Required Minimum Distributions (RMDs) No RMDs during the account holder’s lifetime; beneficiaries can stretch distributions over many years Distributions must begin at age 72; beneficiaries pay taxes on inherited IRAs

In general, a Roth IRA is a better choice if you expect to be in a higher tax bracket in retirement than you’re in now. If you do, it’s better to pay your taxes now, at the lower rate, and enjoy tax-free withdrawals later.

They’re also a good idea if you don’t think that you’ll need to take money out of your IRA. There are no required minimum distributions during your lifetime, so you can leave the entire account to your beneficiaries.

What is the income limit for a spousal individual retirement account (IRA) in 2022?

The upper income limit for a spousal Roth or traditional individual retirement account (IRA) is $208,000 for 2021 and $214,000 for 2022.

Do I have to file joint taxes to contribute to a spousal IRA?

Yes. To open a spousal IRA, you must file your taxes as married filing jointly. This is necessary because your tax return is used to verify that the income level is appropriate for these tax-advantaged investment tools.

Does the money in my spousal IRA belong to me or my partner?

Once the money has been contributed, it belongs to the owner whose name is on the account. In a situation like divorce or separation, this means that the money in the account belongs to the non-income-earning spouse.

The Bottom Line

A spousal Roth IRA can be an excellent way to boost your tax-advantaged retirement savings if your household has just one income. You’ll pay taxes now and withdraw funds tax free later on, when you might be in a higher tax bracket.

Also, it can be a way to provide a measure of financial security for a spouse who does a great deal of work—but who may not be financially compensated for it.

Remember: A spousal IRA can be structured as either a traditional or a Roth IRA. If you’re not sure which type of IRA would benefit you and your spouse more, speak with a trusted financial advisor.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Internal Revenue Service. “Retirement Topics — IRA Contribution Limits.”

  2. Congressional Research Service. “Traditional and Roth Individual Retirement Accounts (IRAs): A Primer,” Page 5 of PDF.

  3. Internal Revenue Service. “Traditional and Roth IRAs.”

  4. Internal Revenue Service. “Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs),” Page 6.

  5. Internal Revenue Service. “IRS Announces 401(k) Limit Increases to $20,500.”

  6. Internal Revenue Service. “IRA FAQs.”

  7. Internal Revenue Service. “Retirement Topics — Beneficiary.”

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