The IRS allows married couples to utilize a spousal IRA, enabling non-working spouses to build retirement savings while potentially lowering the household’s taxable income. This strategy allows contributions to a traditional or Roth IRA in the non-employed spouse’s name, funded by the working spouse’s earnings. In 2026, individuals under 50 can contribute up to $7,500, while those 50 and older can contribute $8,600.
This approach can be particularly beneficial for households in higher tax brackets, as contributions to a traditional spousal IRA can provide immediate tax deductions. Conversely, a Roth spousal IRA offers tax-free growth, though it comes with income limits for higher earners. Understanding the implications of account ownership is crucial, as funds belong to the account holder, which could have ramifications in the event of divorce.
For financial professionals, advising clients on spousal IRAs could enhance retirement planning strategies, especially for families navigating single-income dynamics. Keeping abreast of annual contribution limit changes is essential for maximizing these tax-advantaged accounts.
Source: fool.com