The Spousal IRA: How One-Income Couples Can Double Their Retirement Space
The Spousal IRA: How One-Income Couples Can Double Their Retirement Space
COACHING POINTS
- The Myth: Many couples believe that you must have earned income (a job) to contribute to an IRA. This leads to the non-working spouse having $0 in retirement savings.
- The Rule: The Spousal IRA provision allows a non-working spouse to contribute to a Traditional or Roth IRA based on the working spouse’s income, provided they file a joint tax return.
- The Strategy: This effectively doubles the household’s tax-advantaged savings space (e.g., from $7,000 to $14,000 in 2025), creating a massive wealth compounding engine for single-income families.
Retirement planning is often biased toward the earner. 401(k)s, for instance, are tied strictly to the employee. However, the IRS recognizes the economic partnership of marriage. The Spousal IRA is not a special account type; it is simply a standard IRA funded by the “community pot” of the couple’s earnings. Ignoring this is leaving half your tax shelter on the table. Source: IRS Publication 590-A (Contributions to IRAs)
Scenario: One spouse earns $100,000. The other stays home with kids. (2025 Limits: $7,000 per person).
- Standard Approach (Worker Only):
Worker contributes $7,000 to IRA.
Non-Worker contributes $0.
Total Saved: $7,000. - Spousal IRA Strategy:
Worker contributes $7,000 to IRA.
Non-Worker opens an IRA and contributes $7,000 (using Worker’s income).
Total Saved: $14,000. - The Requirement: The working spouse must earn at least enough to cover both contributions ($14,000 total).
What-If Scenario: 30 Years of Compounding
Comparison: Investing for one spouse vs. both spouses (7% return).
| Strategy | Annual Contribution | Future Value (30 Years) |
|---|---|---|
| Worker Only | $7,000 | $661,000 |
| Spousal Strategy | $14,000 | $1,322,000 |
Visualizing the Capacity
| Household Type | Max IRA Contribution ($) |
|---|---|
| Single Earner (No Spousal IRA) | 7000 |
| Single Earner (With Spousal IRA) | 14000 |
*The Spousal IRA allows single-income households to match the savings capacity of dual-income households.
The Wealth Gap (30 Years)
| Strategy | Ending Balance ($ Millions) |
|---|---|
| Worker Only | 0.66 |
| Spousal IRA Added | 1.32 |
*By filling both buckets, the household effectively doubles its retirement outcome without needing a second job.
Execution Protocol
You must be legally married and file Married Filing Jointly (MFJ). If you file Separately (MFS), you generally cannot use this strategy (or the income limits are severely restricted).
An IRA is an Individual Retirement Arrangement. You cannot simply put double money into the worker’s account. The non-working spouse must open an account in their own name and SSN.
If the working spouse has a workplace retirement plan (401k), the deductibility of the Spousal Traditional IRA depends on income limits (approx. $230k+ for MFJ). However, the Backdoor Roth IRA strategy works perfectly here if income is too high for direct contributions.
COACHING DIRECTIVE
- Do This: If you are a single-income family, make funding the Spousal Roth IRA a priority equal to the worker’s IRA. It is the most efficient way to build tax-free family wealth.
- Avoid This: Stopping savings for the stay-at-home parent. This creates a dangerous financial imbalance and wastes valuable tax-deferred space that you can never get back.
Frequently Asked Questions
Is there an age limit?
There is no age limit for contributing to a Traditional or Roth IRA, as long as the working spouse has earned income. However, RMDs (Required Minimum Distributions) will start at age 73 for Traditional IRAs.
What if we file separately?
If you file Married Filing Separately (MFS), you generally cannot make Roth IRA contributions (limit phases out at $0-$10k income). The Spousal IRA strategy essentially requires a Joint return.
Can we do this if the worker is over 70?
Yes, as long as there is earned income (wages, salary, self-employment) sufficient to cover the contribution. Passive income (pensions, investments) does not qualify.