Your working mate can make contributions to a traditional or Roth 'spousal IRA.'
One probable result of the Great Resignation is more stay-at-home moms and dads. And more folks without kids who stay at home too. Whether your stay-at-home status is temporary or permanent, you might not want to take a break from saving for retirement in a tax-favored way by making contributions to a traditional or Roth spousal IRA. Your working mate can make contributions too. Here’s the deal.
If the working spouse is covered by a tax-favored retirement plan, via a job or self-employment, the deductibility of the nonworking spouse’s contribution is phased out for the 2022 tax year between joint adjusted gross income of $204,000 and $214,000. Example 1: You’ve joined the Great Resignation to be a stay-at-home parent. You and your working spouse file jointly and will have $200,000 of AGI this year. All the income is from your spouse’s job. Your spouse participates in a tax-favored retirement plan at work. For 2022, you don’t participate in any plan. For the 2022 tax year, you as the nonworking spouse, can make a deductible contribution of up to $6,000 to a traditional IRA set up in your name.
If your working spouse participates in a tax-favored retirement plan, your spouse’s ability to make a deductible traditional IRA contribution for the 2022 tax year is phased out between joint AGI of $109,000 and $129,000. Roth IRA contributions With Roth IRAs, deductibility is not an issue. Contributions are made with after-tax dollars and are subject to the same annual contribution limits as traditional IRAs. The Roth IRA tax-saving advantage is on the back end. You can withdraw all your Roth account earnings, along with the sum of your annual contributions, federal-income-tax-free after age 59 1/2, as long as you’ve had at least one Roth IRA open for over five years.