Spousal IRA's

 With tax time at hand, we’ve been talking about using IRA’s to drop taxable income so I thought I’d explain what is a spousal IRA, and when is it a good idea? As you probably know, you can’t really combine retirement accounts as a couple. For example, I can’t throw my 401(k) into my partner’s 401(k) to create one mega 401(k). But if my spouse loses their source of income, I *can* open a spousal IRA—either traditional or Roth—and contribute to the account in their name so they’re covered in retirement. Spousal IRAs are the exception to the rule that an individual must earn money to contribute to a retirement account. Say your spouse is someone without a traditional income stream—a stay-at-home parent, for example. You can use a spousal IRA. Plus, even though the IRA holder may not contribute to the account, they are the sole account owner. That means they make all the account management decisions, including choosing beneficiaries. This is not, I repeat, not a joint IRA. A few caveats: To take advantage of spousal IRAs, couples must file taxes jointly. There’s also a contribution limit of $6,000 per individual for 2022 and $6,500 for 2023. You can contribute $1,000 more if you're 50 or older.

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