Saving for retirement can be difficult, and although retirement savings plans can help you get more money in the bank, they also come with sometimes burdensome restrictions, including rules on transferring money. Generally, you cannot transfer an individual retirement account, also known as an IRA, from one spouse to another.
Unfortunately, IRAs are not transferable, even among spouses.
Individual Retirement Accounts
Individual retirement accounts, like a Social Security number or credit score, are assigned only to individual people. It is not possible to create a joint IRA, even between married spouses. While an individual can combine or roll over their own retirement accounts, this can only be done when all of the accounts are owned by the same person. If both spouses wish to save for retirement, they will each need their own IRA.
Inheriting An IRA
If a spouse dies, the other spouse may inherit the retirement account. When setting up an IRA, you'll be asked to name a beneficiary of the account should you die. If the account holder dies, the spouse may re-title the account in her own name and continue to pay into the account or transfer the money into a new or existing IRA. These transferred accounts have the same restrictions as an IRA that wasn't transferred upon death, which means that the surviving spouse will pay a penalty if he withdraws the money before retirement.
A surviving spouse may also inherit the IRA of a spouse through the probate process. If an account holder does not designate a beneficiary, the money in the IRA will become part of the person's estate and will be distributed to any heirs through the probate process. In many states, this means that a surviving spouse will inherit all or some of the IRA, depending on state probate laws. If an account holder wants a spouse to inherit his IRA upon death, the account holder should make sure to name the other spouse as a beneficiary in order to avoid the complex and lengthy probate process.
Generally, you must have qualifying income to contribute to an IRA, but if you are married and you file your taxes jointly, you can take advantage of an exception to this rule. Spousal IRAs allow a primary earner with a qualifying income to fund an IRA for the other spouse, even if the other spouse does not have a qualifying income. There is no difference between an IRA and a spousal IRA, they are just called such in order to designate their exemption from the qualifying income rule.
Spousal IRAs are subject to the same contribution limits as any other IRA. For 2018, this maximum contribution for those under 59 1/2 is $5,500. Additionally, a spousal IRA must be set up in the non-working spouse's name and Social Security number. You cannot jointly hold a spousal IRA.
Consolidating IRAs At One Investment Firm
Although you cannot generally combine IRAs or transfer them from spouse to spouse, many people choose to move both accounts to the same investment management for ease of access. Many investment firms will offer lower fees for multiple family accounts held at the same firm, and keeping both IRAs in the same investment firm can simplify your money management process.
Bea is a personal finance and legal writer based in Texas.