No matter how much you love your spouse, one thing you can't share – at least legally – are your individual retirement arrangements. By law, as the name implies, IRAs must be associated with just one person. However, being married does have several benefits related to IRAs that you can take advantage of to boost your retirement savings.
You cannot open a joint IRA account with your spouse or anyone else.
IRA Contribution Limits
Since each spouse has a separate IRA, married couples can effectively double their annual contribution to IRAs. For example, if the annual contribution limit is $6,000 per person, the husband can contribute $6,000 to his IRA and the spouse could contribute $6,000 to her IRA for a total of $12,000 contributed to tax-sheltered IRAs in just one year. In addition, assuming you qualify to contribute to a Roth IRA, you can further diversify your contributions by having one spouse make traditional IRA contributions while the other makes Roth IRA contributions. Effectively, the total IRA contribution limits for a married couple are twice that of a single filer.
Traditional IRAs give you a tax benefit immediately, letting you deduct the amount you contribute to the account from your taxes that year. With Roth IRAs, you pay tax on the funds up front, then get to withdraw the principal and any investment income when you retire. If you take funds out of a traditional IRA or income out of a Roth IRA before age 59 1/2, you generally face a tax penalty.
One drawback of being married is that your spouse's participation in an employer plan can count against you. Generally, if you don't participate in an employer-sponsored plan, you can always deduct your traditional IRA contribution. However, if your spouse is covered, you can't deduct your traditional IRA contribution if your modified adjusted gross income exceeds the annual limits, even if you file separate returns. The IRS announces the updated limits each year in IRS Publication 590.
IRAs give you the ability to list someone as the beneficiary to inherit the account upon your death. Not only can you name your spouse, but when a surviving spouse inherits an IRA, she can treat it as her own rather than as an account beneficiary. This means that your spouse can combine the inherited IRA with her own IRAs after your death, and that she won't have to take required distributions from the account until she reaches age 70 1/2 years old.
Exceptions for Spousal IRA Contributions
If you don't work, you usually can't contribute to an IRA because you don't have earned income. However, the IRS makes one exception to this rule for married couples who file joint returns. For joint filers, the non-working spouse can rely on the earned income of the working spouse to qualify to make an IRA contribution. For example, if the working spouse earns $50,000, the non-working spouse can use that earned income to justify an IRA contribution.
2018 Tax Law Changes
The 2018 tax law changes aren't significantly impacting IRAs. The contribution limit is remaining at $5,500, or $6,500 or people 50 and over.
If you are married filing jointly, and your spouse has a retirement plan at work and you do not, and you're collectively making between $189,000 and $199,000, you only get a limited deduction. If you're making more than $199,000, you get no deduction. The covered spouse gets a partial deduction between $101,000 and $121,000 in adjusted gross income and none above that.
2017 Tax Law Situation
For 2017, the contribution limit is also $5,500 for those under 50 and $6,500 for people 50 and over.
Deductions are limited between $186,000 and $196,000 in AGI if your spouse has a work retirement plan and you do not. Beyond $196,000, there's no deduction. The covered spouse gets a partial deduction between $99,000 and $119,000 in collective AGI
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