Spousal IRA can provide little-known tax break

Dear Savvy Senior: What can you tell me about spousal IRAs? My spouse and I are in our 50s and are looking for ways to boost our retirement savings. My wife is a homemaker and caregiver, and works part time too, but her income is very small. — Need a Boost

Dear Need a Boost: Saving for retirement can be very difficult for married spouses who stay home to care for family or otherwise have little income. But there is a little-known tax break offered by the IRS, called a spousal IRA, which can help them and their partner save for retirement.

Spousal individual retirement accounts allow a working spouse to contribute to a nonworking or low-earning spouse’s retirement savings. They can be set up as a traditional IRA or Roth IRA, which allow couples to save for retirement on a tax-deferred or tax-free basis.

How they work

A spousal IRA isn’t a unique type of IRA or a joint account, but instead it is a separate IRA opened and owned in the name of the nonworking or low-income earning spouse. This will not only help boost your family’s overall retirement savings, but it provides nonworking/low-earning spouses access to their own funds in an unforeseen event such as the death of their spouse, divorce or illness.

To qualify for a spousal IRA, spouses must file taxes jointly as a married couple, and the working spouse must have enough earned income to cover contributions for both parties.

The process of opening a spousal IRA is no different from opening a regular IRA. Brokerage firms and many banks and other financial institutions offer IRAs.

In 2025, each spouse under age 50 can contribute up to $7,000 annually to an IRA, or $8,000 annually for those over age 50, but the total contribution cannot exceed the taxable earned income reported on the couple’s tax return. Otherwise, the IRS limits contributions based on their earned income.

Roth or traditional?

Deciding whether to open a Roth or traditional IRA depends on your tax situation and financial goals.

Traditional IRA contributions typically are tax deductible the year in which they are made and are beneficial during high-income earning years. Contributions grow tax-free until they are withdrawn in retirement.

Roth IRA contributions aren’t tax deductible the year in which they are made, but qualified contributions plus any earnings grow tax-free and are withdrawn tax-free in retirement as long as the couple follows IRS rules. Among them: You must be 59½ and have held your Roth IRA for at least five years before you withdraw investment earnings tax-free and penalty-free.

There are also penalties for withdrawals on traditional IRAs before age 59½ unless the owner qualifies for an exception, and he or she must begin taking the annual withdrawals known as required minimum distributions (RMDs) from these plans the year he or she turns 73 (or 75 beginning in 2033). Roth IRAs don’t require RMDs until after the death of the owner. However, beneficiaries of a Roth IRA generally will need to take RMDs to avoid penalties, although there is an exception for spouses.

For more information on the IRS rules of traditional and Roth IRAs, see IRS.gov.

Send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070, or visit SavvySenior.org.