What is a Spousal IRA?
A Spousal IRA is a specialized individual retirement account designed for couples, particularly benefiting a non-working or low-income spouse. This type of IRA allows one spouse to contribute to the retirement savings of the other, in order to maximize savings potential.
Eligibility
To qualify for a Spousal IRA, the couple must file taxes jointly. The working spouse must have enough earned income to cover the contributions of both IRAs. The maximum annual contribution limits apply, which can change annually.
Contribution Limits
For 2023, the contribution limit is $6,500 per person, or $7,500 if age 50 or older. This allows couples to potentially save up to $13,000 or $15,000, respectively, through a Spousal IRA.
Tax Advantages
Contributions to a Spousal IRA may be tax-deductible, and the account grows tax-deferred until withdrawal. This tax advantage is essential for effective estate and retirement planning.
Types of Spousal IRAs
Spousal IRAs can be traditional IRAs or Roth IRAs, providing flexibility in tax treatment. The choice depends on the couple’s financial situation and retirement goals.
Conclusion
Using a Spousal IRA can significantly enhance a couple’s retirement savings strategy. It is a valuable tool in both estate and retirement planning, ensuring financial security for couples in their golden years.