Spousal Roth IRA Plans and Details
Retirement planning should be a comprehensive process, whereby you should take advantage of every opportunity to sock away some funds for the future. One such opportunity that is commonly missed is to take advantage of the spousal Roth IRA, especially if your spouse isn’t working, and you have the disposable income to do so.
There are requirements for a spousal Roth IRA that you should be cognizant of when looking into setting up this plan. First and foremost, you must be married legally by a court of law. Living together, or being engaged is not enough to qualify for this plan. In the course of opening up a spousal IRA, you will need to give the appropriate documents to provide evidence of your marriage.
After fulfilling this requirement, next you will have to have provided a joint year end income tax return. A spouse can either work for a company, be a non working spouse, or they can be self employed, in order to be able to make the ira contributions. For a spousal IRA, there is no associated age limit, therefore you can open up the account regardless of your age, provided that the requirements listed above are met. The spouse can contribute to the IRA until retirement age, or death, and as with any retirement account, you can leave the remaining amount in your retirement account to your named beneficiaries.
It is very important, as it is with any Roth IRA plan, that you qualify for the income requirements to take part in this account. For the 2010 year, these limits are:
Adjusted Gross Income based contribution limits
Your eligibility to make a contribution to a Roth IRA for 2010 is based on having a AGI of $167,000 and $177,000 for couples who are filing jointly, and between $105,000 and $120,000 for those who are filing separate returns. If you happen to think that these requirements are too low, make sure that you take the phase-out rule for married individuals who file separate returns into consideration.
It doesn’t necessarily matter where the source of your contribution comes from, and with regard to the spouse who is working, it would most likely come from their salary or your combined savings. In the meantime, for the spouse who is working, you either make the contributions yourself, or from your spouse, but the retirement account must be solely in their name alone. You should also put a schedule of annual or monthly contributions to ensure that you are taking full advantage of this account.
Main Benefits of a Spousal Roth IRA
For a Roth IRA held by the spouse, you can definitely use this as another source to put away some cash for a rainy day. This account will permit both of you to store up to $5,000 annually into your retirement account. However, if one spouse is over the age of 50, then you can contribute up to $6,000 each calendar year. As opposed to just having an individual IRA, you can save up from $10,000 to $12,000 every year.
However, the main benefit from having a spousal Roth IRA is the fact that your savings will be gleaned from your after tax income, and when you do take income in the future, it is tax free. That is a tremendous opportunity to have your cake and eat it to as you avoid taxes on both the growth and contributions.
