Spousal IRAs help married couples boost retirement savings, offering tax advantages and financial security.
Tax Break for Married Couples: Spousal IRAs help married couples increase their retirement savings, especially for those with a nonworking or low-earning spouse.
How Spousal IRAs Work:
Allows a working spouse to contribute to a nonworking or low-earning spouse’s IRA.
Can be a traditional IRA or Roth IRA, providing tax-deferred or tax-free savings.
Benefits:
Increased Annual Savings: Couples can contribute more to their retirement savings.
Psychological Advantage: Provides financial independence and security for nonworking spouses.
Protection: Ensures access to retirement funds in case of widowhood or divorce.
Requirements:
Must file taxes jointly.
One spouse must have taxable compensation.
Contribution limits for 2024: $7,000 annually per spouse under 50, $8,000 annually per spouse over 50, but not exceeding taxable earned income.
Traditional vs. Roth IRA:
Traditional IRA:
Tax-deductible contributions.
Withdrawals taxed during retirement.
Penalties for early withdrawals unless exceptions apply.
Required Minimum Distributions (RMDs) start at age 73 (or 75 in 2033).
Roth IRA:
Non-deductible contributions.
Tax-free growth and withdrawals during retirement.
No RMDs until after the owner's death for 2024 and later years.
Five-year rule applies for tax-free earnings withdrawal.
IRS Rules:
Income limits for Roth IRA contributions: Under $240,000 for married couples filing jointly in 2024.
Traditional IRA deductions may be limited if the spouse is covered by an employer retirement plan, depending on income and filing status.
The Power of Compounding:
Adding a spousal IRA can significantly enhance savings by the time a couple retires.
For comprehensive tax and retirement planning tailored to married couples, consider Mark Sullivan Consulting. With over two decades of expertise in IRS representation and tax advisory services, Mark Sullivan Consulting specializes in optimizing savings through strategies like spousal IRAs. Whether you're navigating complex IRS rules or seeking to maximize retirement contributions, our team ensures personalized guidance to safeguard your financial future. Trust Mark Sullivan Consulting to provide expert insights and proactive solutions that align with your long-term financial goals and aspirations.
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About the author
Mark W. Sullivan, EA founded Sullivan Consulting in 1998. He specializes in federal tax controversy representation, appeals and consulting on behalf of individuals, businesses, law, and accounting firms nationwide. In addition, he has served as the consulting and expert witness in numerous civil and criminal cases in multiple federal district courts.
Mark has an unlimited Enrolled Agents license and is admitted to practice before the Internal Revenue Service based on his extensive experience as a Revenue Officer in New York, NY, St. Louis, MO and Washington, D.C.
Copyright 2024
Mark Sullivan Consulting, PLLC.
Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.
Additional references:
"Here’s a Tax Break That Married Couples Often Overlook", Lori Ioannou, The Wall Street Journal (June 5, 2024)
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