If you want to contribute money to an individual retirement account (IRA), the rules are relatively simple: You need to earn a verifiable income. But what if your partner works while you act as a stay-at-home spouse?
You might think that you’re ineligible to open up an IRA or save for retirement since you don’t earn a regular income. However, the IRS recognizes your contributions to the household as work, and you have the same opportunities to save using a spousal IRA.
What is a spousal IRA?
If your spouse is the family’s breadwinner, that can put you at a disadvantage when it comes to retirement savings. According to Victor Ricciardi, a financial management professor and author, spousal IRAs help bridge the gap and allow you to build your own retirement fund.
“Spousal IRAs are a wonderful way for married couples to build wealth even when one spouse does not have any earned income or has very little income to save for retirement,” says Ricciardi.
Under the standard rules, you need to earn income to contribute to any form of IRA. But with a spousal IRA, the IRS eliminates that requirement so that a stay-at-home husband or wife can save. For families who have decided to have one person stay home, it can be a huge help in saving money for the future.
A spousal IRA is not a unique form of IRA. It’s just a ROTH or traditional IRA that lets a nonworking partner contribute to a retirement account and get the same incentives as someone who is employed. Additionally, the nonworking person gets access to IRA investment options, including mutual funds and exchange-traded funds.
What are the spousal IRA rules?
A spousal IRA is not a joint retirement account for both partners. It is set up exclusively in one person’s name, and in the case of divorce, remains in that person’s possession. According to Ricciardi, that is an important distinction to keep in mind for your financial planning.
“A spousal IRA builds trust and financial literacy for a married couple since both individuals will have their own separate retirement accounts. This helps both partners realize the importance of planning for a wonderful retirement together,” says Ricciardi.
To open a spousal IRA and contribute money to it, you must be married and file your taxes together to show a source of income.
You can contribute to an IRA even if the working spouse has an employer-sponsored retirement plan, such as a 401k. The IRA can be a great way to supplement your retirement savings and boost your portfolio.
If you have a traditional IRA and your spouse’s employer does not offer a retirement plan, the contributions to the spousal IRA are completely deductible on your taxes. If you have a Roth IRA, the contributions are not tax deductible, but once you retire, your withdrawals are tax-free.
Who can make spousal IRA contributions?
You or your partner may contribute to a spousal IRA, as long as you file your taxes as married filing jointly.
If you do not work now, but did before and had an IRA in the past, there is no need to open a new one. You can just use the old IRA and make contributions as usual. If you decide to go back to work in the future, you can continue to contribute to the same IRA.
What are the spousal IRA contribution limits?
According to the IRS, the annual contribution limit for 2017 is $5,500, or $6,500 if you are 50 or older. You and your partner can contribute to your own IRAs, but your contributions cannot exceed your joint taxable income or the annual contribution limits on IRAs.
If you both contribute to an IRA, that means you can save up to $11,000 a year if you are under the age of 50.
“If a married couple fully contributes money to an IRA account, with the use of a spousal IRA they are saving twice as much towards retirement in a given year,” says Ricciardi.
Tax-deferred retirement accounts are an excellent vehicle to save for retirement, and spousal IRAs give stay-at-home partners a way to build their own savings. If you work with your partner, you can use your IRAs strategically to save more and give yourselves a strong nest egg.
If you stay at home but have not opened a retirement account for yourself, consider opening one right away.
If you have student loans, it can be difficult to find the extra money to save, but by saving a little now, the power of compound interest will give you a lot more money later on when you retire. Start saving now to reap the benefits in your golden years.
For more information on how to balance paying down student loan debt while saving for retirement, check out this article.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.57% – 6.97%1||Undergrad & Graduate|
|2.47% – 6.99%3||Undergrad & Graduate|
|2.68% – 8.77%4||Undergrad & Graduate|
|3.24% – 6.66%2||Undergrad & Graduate|
|2.61% – 7.35%5||Undergrad & Graduate|
|3.01% – 9.75%6||Undergrad & Graduate|