A spousal IRA is a separate retirement account specifically designed for non-working spouses, often overlooked by married couples. According to certified financial planner Judy Brown, these accounts can provide a tax break and boost retirement savings for nonearning spouses. As of 2021, Pew Research Center reported that about 18% of parents, mostly women, did not work outside the home, making them potential candidates for spousal IRAs.
Married couples filing jointly have until the federal tax deadline, typically April 15, to make IRA contributions for each spouse, provided there is enough earned income for both deposits. Traditional pretax spousal IRA contributions can help reduce taxes for 2023, depending on income and workplace retirement plan participation. It’s recommended by financial experts like CFP Catherine Valega and Judy Brown to take advantage of spousal IRAs, even with modest contributions, as they can still lead to tax savings.
However, it’s essential to consider individual financial situations before making spousal IRA deposits. As suggested by CFP Laura Mattia, factors like short-term expenses, future required minimum distributions, and potential tax implications should be taken into account. While spousal IRAs can be a valuable tool for retirement savings, they should be used strategically to align with overall financial goals and circumstances.