Spousal IRA

Spousal IRA

From the Her Money Moves Mailbag:

Hi Christine: I’m currently a SAHM and my husband is in the Army. He contributes to his TSP. He is signed up for the Blended Retirement System and we make sure he’s contributing enough to get his full match too. I’m glad we’re saving for our retirement. I know we’re married and it is “our money” but sometimes I worry about not having any accounts in my own name. Is there any way I can save for retirement as a stay-at-home spouse?

retirement as a stay-at-home spouse

The “Spousal” IRA

First, congratulations on so many things: saving for retirement, using the TSP and getting that BRS match! I have some good news for you. Even though you may not be earning any income outside of your home you can still save for your retirement as a stay-at-home spouse, in your own name.

Often referred to as a “Spousal IRA”, it’s really just like any other Individual Retirement Arrangement (IRA). You can choose a Traditional or ROTH version. In your case, your husband who is the working spouse, has ‘earned income’ he can contribute to an IRA account on your behalf. (He is also able to contribute to his own IRA account if he doesn’t already have one.)

A Spousal IRA isn’t different from any other type of IRA. The name is only referring to the fact that the IRA is held in the name of a ‘non-working’ or stay-at-home spouse. As we know with military life, some years military spouses may work, and some some years they won’t. Having your own IRA will allow you to save for retirement as a stay-at-home spouse.

Just like the name suggests, Individual Retirement Arrangements are not jointly held accounts. Even though your income earning spouse is the one contributing to the IRA, it is held in your name and is opened with your social security number so that you can still save for retirement as a stay-at-home spouse.

Your Money + My Money = Our Money

For many married couples, whether both spouses work or not, choose to look and think about money in terms of “ours” not “yours” or “mine”. If this is the case, why does it matter who’s name the retirement account is held in?

Well, it might not matter at all. In your marriage currently, if you’re thinking about money as “ours” you’ll probably continue to think about it as “ours” during retirement. I’m not a divorce attorney but in the unfortunate case of divorce, retirement accounts and assets earned during the marriage will probably be divided up anyways.

As a stay-at-home spouse, the need or want to save for retirement in your own name says nothing about the stability of your marriage. Having your own IRA has many benefits. Contributing to a Spousal IRA does more than just doubling your IRA contribution opportunities as a couple. As the non-income earning spouse, it might just feel good to have a retirement account in your own name. Logging into your own account, managing, and watching your retirement savings grow is a powerful thing. For the income earning spouse, it can help them show that they appreciate the work that the SAH spouse does for them or their family.

Am I Eligbile?

To be eligible to open a Spousal IRA you must meet these requirements.

  • Be Married
  • File your taxes as “Married, filing jointly”
  • The contributing spouse must have “earned income” that is at least the amount that is contributed to the non-working spouse’s IRA. If the working spouse also has their own IRA, they must make enough earned income to cover both the contributions to both IRAs.
  • For a traditional IRA, the non-working spouse must be under 70.5 years old in the year of the contribution.
  • For ROTH IRA, the contributing spouse must not make more than the IRA Income Requirement for that year (usually not an issue for military families).

Contribution Limits

Anyone, military or civilian can contribute to an IRA. In 2019 the contribution limit is $6,000 per IRA. If you are age 50 or older you get an extra catch-up limit of $1,000.

Just like the TSP, IRA accounts come in two flavors, ROTH and Traditional. Depending on your income (there are income limitations for ROTH), you can contribute to one type of account or a combination of both, as long as you stay under the annual contribution limit.

Remember that an IRA has NOTHING to do with the TSP (or any other type of civilian employee-sponsored retirement plan). They are totally independent of each other. You can contribute your maximums to both the TSP and your own IRA. You can contribute to the ROTH TSP and contribute to a Traditional IRA, vise versa, or a mixture of both. My point being, they really have nothing to do with each other, so don’t let that confuse you.

How Do I Open an IRA?

Opening an IRA is a pretty simple process, but you’ll have to make some decisions first. Do you want to open a traditional or ROTH IRA? Will you go through your bank, a broker or a robo-adviser? You’ll also want to keep an eye on trading fees and expense ratios. Similar to the TSP, you’ll also make your investment choices. Although, with an IRA, you’ll have more choices to make that what the TSP offers.

If you are at a complete loss of where to start, Military One Source offers free and unlimited financial counseling from Accredited Financial Counselors (AFCs) for all active-duty service members, National Guard, reserve members, and their families and survivors.

How to save for retirement as a stay-at-home spouse

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