2022 | Spousal IRA: A Strategy for Tax-Advantaged SavingS

2022 | Spousal IRA: A Strategy for Tax-Advantaged SavingS

If you and your spouse both have access to an employer-sponsored 401(k) plan, retirement saving is as easy as specifying the pre-tax contribution amount to be deducted from your paycheck. But for many couples, it’s a little more complicated. The decision may be for one spouse to leave full-time work for a period of time to care for children or parents. Or one spouse may have started a new business that currently doesn’t generate any income. 

Lack of an income doesn’t have to mean neglecting tax-advantaged retirement. The IRS has created an exception to the rule that individuals must have earned income to make IRA contributions. It’s called a Spousal IRA. 

Contributing regularly can keep retirement savings on track and provide access to tax-deferred investment growth. If you set up a Traditional IRA, the contribution may be tax-deductible and can lower your tax burden. 

The Rules of the Spousal IRA

The spousal IRA is a regular IRA account and can be set up as either a Traditional IRA or a Roth IRA. It is an individual account held in the name of the spouse. To be eligible, taxes must be filed as “married filing jointly.” The maximum contribution amount is the same – $6,000, with an additional $1,000 catch-up for those age 50 and above (2022). 

If you set up a Traditional IRA and plan to take a deduction, there are some income limits to be aware of. The full amount is deductible if the working spouse is not covered by an employer’s retirement plan. The deduction phases out according to income level when the working spouse does have an employer sponsored plan. For 2022, if household (MFJ) income is $109,000 or less, the full amount is deductible. A partial deduction may be taken if income is more than $109,000 but less than $129,000. At $129,000+ the contribution is not deductible. 

Taking Withdrawals and Distributions

The spousal IRA follows the same withdrawal rules – you need to be age 59 ½ to take money out, or you’ll get hit with the 10% early withdrawal penalty. And required minimum distributions will also need to be taken out of the account beginning at age 72. 

If part of your retirement plan is to convert Traditional IRAs to Roth IRAs, you’ll need to do some careful planning. Taxes will be due on the amount withdrawn, potentially creating a significant tax burden in the year(s) of the conversion. The Roth conversion will eliminate RMDs in the future, allow the account to remain invested, and simplify estate planning. 

Security For a Longer Retirement

Contributing to a spousal IRA can add up considerably if done consistently, which will increase the total amount of retirement savings. Depending on income levels, it may also provide an additional tax deduction. But just as important, it’s a great way to protect a spouse when the decision is made for one partner to leave the workforce to care for children or other family members. 

The Takeaway

A spousal IRA expands the retirement savings toolkit and can help lower taxes during working years. Decisions will need to be made on retirement about whether to convert to a Roth IRA, and appropriate tax planning across all retirement accounts will be necessary.  


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The information contained herein is intended to be used for educational purposes only and is not exhaustive.  Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return.  If applicable, historical discussions and/or opinions are not predictive of future events.  The content is presented in good faith and has been drawn from sources believed to be reliable.  The content is not intended to be legal, tax or financial advice.  Please consult a legal, tax or financial professional for information specific to your individual situation.

This content not reviewed by FINRA.

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