Spousal IRAs provide an excellent way for married couples to save for retirement, especially if only one spouse earns income. Here’s an overview of how the rules for Spousal IRAs apply in 2024, along with updates on contribution limits and income thresholds.
Contribution Limits in 2024
– Traditional and Roth IRA contributions: The limit is $7,000 for individuals under 50. For those aged 50 or older, the catch-up contribution raises the limit to $8,000.
– Married couples: If both spouses are eligible and over 50, they can contribute up to $16,000 combined—$8,000 each across their individual accounts.
Contributions can be made anytime from January 1, 2024, until the federal tax filing deadline, typically April 15, 2025. All IRA contributions, whether for a traditional or Roth account, must be made under individual accounts, not jointly held ones.
Eligibility Requirements and Rules
To open a spousal IRA, the couple must:
– File taxes jointly.
– Ensure the working spouse earns at least enough income to cover both their contribution and the non-working spouse’s contribution.
There are no longer age limits for making traditional IRA contributions, a change made by the SECURE Act. However, income restrictions affect deductibility and Roth IRA eligibility.
Traditional IRA Deduction Phaseouts for 2024
If the working spouse participates in a workplace retirement plan, the ability to deduct contributions phases out as follows:
– Married filing jointly: Full deduction available if Modified Adjusted Gross Income (MAGI) is $123,000 or less. The deduction phases out completely at $143,000.
– If only one spouse participates in a workplace plan, the non-participating spouse can deduct contributions as long as the joint MAGI is $230,000 or less, with the phaseout ending at $240,000.
If neither spouse has a retirement plan at work, traditional IRA contributions are fully deductible, regardless of income.
Roth IRA Contribution Limits in 2024
Roth IRAs have income-based eligibility limits. For married couples filing jointly:
– MAGI under $230,000: Full contribution allowed.
– MAGI between $230,000 and $240,000: Partial contribution allowed.
– MAGI over $240,000: Roth IRA contributions are not allowed, though couples can use a “backdoor” Roth strategy by contributing to a non-deductible traditional IRA and then converting it.
Strategies and Considerations
– Tax Planning: Traditional IRAs offer immediate tax deductions if eligibility requirements are met, while Roth IRAs provide tax-free growth for future withdrawals. Couples must weigh these benefits based on current and anticipated future income.
– Investment Management: Contributions to a spousal IRA should align with long-term goals. Regularly reviewing and rebalancing the portfolio helps maintain the desired risk profile and growth potential.
– SECURE 2.0 Impact: Required Minimum Distributions (RMDs) now start at age 73 for traditional IRAs, though Roth IRAs remain exempt from RMDs during the original owner’s lifetime.
Spousal IRAs remain a powerful tool for couples to maximize retirement savings, ensuring that both partners benefit from tax-advantaged growth—even if only one spouse is working. For more detailed planning and strategy, consulting with a financial advisor is recommended to tailor contributions and optimize deductions based on individual circumstances.
