A spousal IRA allows contributions to be made to into an account on their spouses behalf. They were created to allow stay at home parents to put away money for retirement even if they don’t earn any income. Normally you’re allowed to contribute $5,000 or 100% of your income to your IRA. However if you’re a stay at home mom or dad you don’t have an income, which is where the spousal IRA comes into play. The working spouse may put away money into their spouse’s IRA.
You can setup a spousal roth IRA or a traditional IRA. In order to qualify for a spousal IRA you need to file your taxes jointly with your spouse. All the rules that apply to a regular IRA apply to a spousal IRA. Instead of contributing a maximum of $5,000 to your own IRA you can contribute $5,000 to yours and $5,000 to your spouse’s for a total of $10,000 in contributions. You can also contribute an additional $1,000 for you or your spouse if either or both of you are over 50.
Unlike a joint account where all money is kept in one account IRAs are separate accounts. If a married couple gets divorced then each partner takes their own IRA account. If you do get divorced you can’t take a tax deduction on spousal IRA contributions the year you get divorced.
Just like with regular IRAs you can receive IRA disbursements at the age of 59 ½. Creating an IRA for your non-working spouse is important to ensure an enjoyable retirement for the both of you. A financial consultant or retirement planner can give you more information if you want to learn more about spousal IRAs.