Bottom Line Up Front (BLUF): If you are married and your spouse has no income (and you file taxes jointly), you can both still invest in IRAs or Roth IRAs. This means, your family can invest $6,000/year in your IRA and $6,000/year in your spouse’s IRA!
Many military households are single-income where the service member is the sole breadwinner. If you fall into this situation, did you know that your spouse can still invest up to $6,000/year in their own IRA or Roth IRA?
As a Recap, what is an IRA?
An Individual Retirement Account (IRA) is an investment account that is tax advantaged where you can invest $6,000/year. When you invest money in a traditional IRA, you receive a tax refund (but you pay taxes later). When you invest in a Roth IRA, you invest money you’ve already paid taxes on, but your investments grow tax free. Both are retirement accounts designed to let your money grow in a tax-advantaged way until you are retirement age.
For more info, read this post about the differences between IRAs and Roth IRAs.
What is a Spousal IRA?
A Spousal IRA allows you to invest up to $6,000/year in your spouse’s IRA retirement account, even if they do not have any income. So, if you spouse is a stay-at-home parent, they can still invest $6,000/year in their account. At the same time, you can invest another $6,000/year in your account.
To invest in a Spousal IRA, your family must file your taxes as “married filing jointly”.
Follow this link to see the IRS’s rules on Spousal IRAs.
Can a Spousal IRA be a Roth IRA?
Yes. You can create a Roth IRA for your Spouse. This allows you to invest money in your spouse’s Roth IRA and let those investments grow tax-free. Because most military members are in lower tax brackets, investing in Roth IRAs can help you reduce your total tax bill by thousands over your lifetime!
Why does this matter?
If you opt to create a Spousal IRA for your spouse, then your household can invest up to $12,000/year in IRAs - $6,000/year for you, and $6,000/year for your spouse - instead of just $6,000/year.
This increases the total amount of money you can invest in tax-advantaged accounts, increasing your family’s ability to build wealth.
How do I create a Spousal IRA?
A Spousal IRA is just a regular IRA. However, it must be created under your spouse’s name. You can open an IRA the same way you opened yours, preferrably through a low-cost brokerage such as Schwab, Vanguard, or TD Ameritrade.
You’ll likely have to create it in a separate account (with a separate login) for your spouse.
For more information
If you want to read more, here are some great resources: