Can I Open a Roth IRA with My Spouse?

Man putting money into piggy bank.

Creating financial security is the fundamental building block for your retirement savings. It’s also a popular reason why so many Americans opt for a Roth IRA. 

With a Roth IRA, you pay taxes when you put money into it, which means you don’t have to pay taxes when you take it out. With that benefit in mind, plus the little-to-no restrictions you have when taking money out (compared to a 401k), it’s no wonder many so people choose a Roth IRA for their retirement plans.

Finding the Best Retirement plan for You

Let’s say you’ve researched different savings plans and explored the differences between a traditional and Roth IRA. And since you’ve decided that a Roth IRA is right for you, the next question is…is it right for your spouse, too?

Should Each Spouse Have a Roth IRA?

Many spouses ask, “Can my wife and I both have a Roth IRA?” Yes, you can each have your own account to contribute to. This maximizes your total contributions and gives your money more compounding power. 

However, you must have earned income in order to contribute to an IRA. “Earned income” – or “taxable compensation” – does not include things like investments or property income; it only includes income from work. 

So, what if one spouse earns little-to-no taxable compensation? What happens next? Let’s review another commonly asked question about IRAs.

Can My Spouse and I Own a Roth IRA Together?

Because married couples can file taxes together, it stands to reason that you could open a Roth IRA together, right? Unfortunately, the answer is no.

Spouses cannot own a joint Roth IRA, and the explanation starts with the name. IRA stands for “Individual” Retirement Account; therefore, each account must be owned by one individual. 

This can create issues when one spouse is maxing out their contribution while the other spouse doesn’t have any taxable income. The most obvious example of this is when one spouse works full-time while the other is a stay-at-home parent.  

In this situation, as long as the couple is married and filing jointly, the stay-at-home parent could open a spousal IRA. That account is theirs, but the full-time working spouse could contribute to it on behalf of the stay-at-home parent: 

It can be a way to provide a measure of financial security for a spouse who does a great deal of work—but who may not be financially compensated for it. (Investopedia)

Because the account belongs to the stay-at-home spouse, any money stays with that person, even in the case of separation or divorce. The exception is if they pass away, in which case, the money goes to whomever is named the beneficiary of the account. 

Are there Any Limitations to a Spouse Roth IRA?

As with any other retirement account, there are certain income requirements and restrictions to be aware of with a spousal IRA. 

Working with a dedicated financial advisor like Focus Financial can help you make the best decision for you and your spouse and help you understand which savings options will help you pursue your goals. 

To get started, find an advisor near you!

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