No Income? You May Still Be Eligible To Contribute To An IRA! Here’s How…

IRAs are an excellent way to save for your retirement. It allows for tax-free growth and you have a variety of options on how best to invest the money.

But IRAs have some requirements.

  • You must be within income limits
  • You must have an earned income equal to or greater than your contribution.

What that means is that you cannot use income derived from dividends or annuities or the lottery towards your IRA contribution!

But what if you are a stay-at-home mom or dad or if you were laid off or had a baby or myriad other reasons that made working not an option? You too face retirement like everyone else, and you too, have to plan for it. What options do you have?

The good news is you do have an option! It is a little known secret not many are aware of!

You can open what’s unofficially called a Spousal IRA. The IRS doesn’t recognize this term nor is there a Spousal IRA form that you can download and fill! But it exists and allows you to potentially double your IRA contribution even though only one of you is working!

If you didn’t start contributing to your retirement early enough, this is a great way to catch up, provided you meet certain requirements.

What is a Spousal IRA?

Spousal IRA is a great option for Stay-at-home moms (and dads!) © D.A.K. Photography (via: Wylio)
A Spousal IRA lets you contribute on behalf of your non-wage earning spouse in addition to your own IRA contribution, provided you file taxes jointly.

For example, Joe and Jane got married last year and decided to have a baby. Jane quit her job and is looking forward to spending time with the baby. Jane can’t contribute to her IRA anymore since she doesn’t have an income now.

That’s where the IRA story from Jane’s perspective, would end for most couples! But… Jane can continue contributing to her IRA from Joe’s earnings! And this is where a smart couple’s story begins!

Though it is Joe’s money, It is Jane’s IRA and Jane will still be the owner. Jane can designate Joe as the beneficiary if she loves Joe as much as Joe loves Jane!

The above was just an example. If your non-working spouse never had an IRA, you can also open a new one.

Can such a couple have two IRAs, one for the working spouse and one, spousal IRA?

Yes! The working spouse can have his/her own IRA and the non-working partner can have one as well, essentially doubling your IRA limits! The working spouse has to make enough to cover the contributions for both.

How Do I Open A Spousal IRA?

Technically there is nothing called a Spousal IRA. The form is the same as the one you would use to open a regular IRA (Roth/Traditional).

Where Can I Open A Spousal IRA

Anyplace where you can open an IRA

What are my options for opening a Spousal IRA?

You can open either a Traditional IRA where your contribution may be tax deductible or a Roth IRA where the contribution is not tax deductible.

Are there any special rules for Spousal IRA?

The same rules that apply to a Roth or a Traditional IRA while filing jointly, applies to Spousal Roth or Traditional IRA.

What are the Spousal IRA limits?

Remember, you must file taxes jointly for all spousal IRAs

Traditional IRA Deductions

If You Are Covered by Retirement Plan at Work

  • FULL DEDUCTION: Your modified adjusted gross income(modified AGI) is: $89,000 or less
  • PARTIAL DEDUCTION:Your modified adjusted gross income(modified AGI) is: More than $89,000 but less than $109,000
  • NO DEDUCTION:Your modified adjusted gross income(modified AGI) is: $109,000 and above

If You Are NOT Covered by Retirement Plan at Work

  • FULL DEDUCTION: Your modified adjusted gross income(modified AGI) is: Any amount!

Roth IRA Contributions

  • FULL CONTRIBUTION: Your modified adjusted gross income(modified AGI) is: Less than $$167,000
  • PARTIAL CONTRIBUTION:Your modified adjusted gross income(modified AGI) is: At least $167,000 but less than $176,000
  • NO CONTRIBUTION:Your modified adjusted gross income(modified AGI) is: $176,000 or more

Where can I download a Spousal IRA form?

There isn’t any form called a Spousal IRA form! You either need to get a Roth or a Traditional IRA and designate it as one for the non working spouse.

Do catch up contributions apply to Spousal IRAs?

Yes. If you are over 50, you can make a catch up contribution of $1000 in addition to the maximum of $5000.

Can I contribute to a spousal IRA but not to my IRA?

Strange, but yes!

I’d Like To Learn More About IRAs

Check out the following articles:
10 Most commonly asked questions on Roth IRA

Where to open a Roth IRA account?

Opening a Roth IRA account at Fidelity – A walkthrough

For families with a single income, a Spousal IRA is a good option which has the potential to double your contribution and/or not miss out on the savings and tax-free growth opportunity the non working partner might otherwise miss out when he or she leaves a job. If your spouse is a stay-at-home mom or dad and you can earn and save enough for both your contributions, you should definitely consider contributing to a Spousal IRA.

One Last Question: I Had An IRA Before I Quit My Job, Can I Use The Same Account As My Spousal IRA?

YES YOU CAN!© Bernard Pollack(via: Wylio)

29 thoughts on “No Income? You May Still Be Eligible To Contribute To An IRA! Here’s How…

  1. A pretty beefy article. Good information. What I don’t understand is the random picture of the president.

  2. Great information. I wish I would have done that years ago when I stopped working. You needed to post this in 1999! :)

  3. I’ve never even heard about spousal IRA. I just learned something new! Thank you! Now I will be able to show off at some social gathering. :-)

  4. I like the picture of the President :)

    IRA’s sound a lot like RRSP’s (the Canadian equivalent, I suppose).

  5. Great post! I had no idea such an option existed. Wish we had known last year while Mr. BP was a law clerk and I was a lowly graduate school intern. I will certainly pass the info along to friends and colleagues as it truly is something I think many people would like to take advantage of during these economic times.

    • Thanks Mrs. BP! (And welcome!)

      Very true! I wish more people knew about this. But spousal iras are poorly understood – even my broker at first didn’t know what I was talking about!

  6. Whoa! I’d definitely get rid of my broker. It may be uncommon to the average Joe, but it shouldn’t be for the broker. Talk about “wealth preventing.” :)

  7. Good job promoting an important investment vehicle for those stay at home moms and dads. Hubby and I have IRA’s from many years ago and continue to fund along with retirement workplace accounts whenever we can. I’m a fan!!!

  8. Cool beans. If I quit my day job and become a full time blogger, would I have my own IRA with blogging income or a spousal IRA with Mr. BFS’s income?

    • You would have your own IRA Crystal!
      Ok, I’m editing this to clarify the response a bit. If your taxable income is less than your husbands but your husband’s income can cover the IRA limits ($10000 combined) for both AND you file jointly, you can use Spousal IRA to overcome your lower limit. A spousal IRA is still yours even though it is partly or fully funded by your husband!

      Remember, there is nothing called Spousal IRA in IRS’ eyes! It is just a way for stay-at-home moms or dads to contribute to their retirement if the working spouse earns enough to cover both.

  9. That’s great to know. Though I noticed that the catch is you have to be filing jointly. This one always gets me since my husband and I file separately for a very good reason. Thanks for sharing this info in case we ever decide it would be better to file jointly.

  10. This is really a great information for spouse who are staying at home. The government are very nice when it comes to the helping the non-working spouse have a retirement plan as well. This is one good example of the IRS making sure that the non-working spouse is also covered by a retirement plan. Another perfect example is that they are also eligible on receiving an amount equivalent to half of their spouse’s social security benefits.

  11. Hmm a good article. I’m not sure if I could ever do that for my spouse. When I was doing my tax class we learned about Spousal IRAs and they seem like a decent idea but a huge issue. It seems like a great way to get out paying taxes on someone who doesn’t report earned income and at the same time wants an IRA.

    • Why is it an issue? The IRS is very specific about the rules. File jointly and your income should be enough to cover the contribution for both.

  12. Yeah, at that great!

    I knew about it, but since we both work (my wife works 8 hrs a week), we both make enough to fund roth iras…

    Now only if we both did fund them… maybe next year! :)

  13. This is great information! Especially for those Real Housewives that don’t work! lol I gotta stop watching reality tv…

  14. Thanks for the great IRA information. I usually work with people in retirement and not contributing anymore so it is easy to forget the pre-retirement details.

    Thanks for the reminder! Just in time to open my wife’s spousal IRA!


  15. This is the most informational IRA article I have read in a long time. Thank you!

  16. The thing that bums me out is that after you make a certain income, you can’t contribute! I think that’s unfair and messed up!


  17. If I just learned about spousal IRAs, but have been eligible for two years in the past, can I somehow make contributions for former years, perhaps by filing an amended return??

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title="" rel=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>