Many individuals face the problem of having a low or no income at all. This problem can create significant obstacles towards the much desired financial stability in the retirement period. One interesting concept that can help in these situations is the idea of opening a Spousal IRA account. This type of account has a unique role which allows an individual with low income to receive IRA benefits through a spouse. Many people are not aware about the benefits of this account. That is why, this article will analyze the concept of Spousal IRA. This model can increase the retirement savings of the couple through tax-deductible contributions.
This savings account is based on a simple concept. To be more specific, a married user who is eligible to set up an IRA can also set an IRA up for a spouse. The first prerequisite is that the individual and the spouse are filing a joint tax return. However, there are limits to how much a married couple filing jointly can save each year through tax-deductible contributions. On that note, it is important to emphasize that there are certain limits about the joint savings during the year. It is imperative that the partners stay below the designated annual threshold in order to receive specific tax benefits on the account. Usually the limit of the spousal account is the same as the primary IRA account of the individual. In the same, it must be noted that specific limits for spousal IRA contributions apply and may affect the total amount the couple can contribute to their combined IRA accounts.
Although, it may sound a very strict and limited concept, that is not the case. On the contrary, the spousal IRA offers a broad spectrum of benefits. The most notable advantage is based on the purpose of the account. The primary aspect of a spousal IRA is to increase the tax-deductible retirement contributions a person can make if that person is responsible for another individual after the retirement. An illustrative example is when an unemployed spouse cannot make savings for his or her retirement without additional assistance. Through the Spousal IRA, the other partner contributes funds for the spouse thus funding for two individuals rather than one, which increases the contribution fees. However, it allows both individuals to retire based on those savings
The current model of Spousal IRA is dating back from 2009. According to that, the spousal IRA contribution limit is set as the lesser of $5,000 annually for those individuals under 50. For the users above 50 years old, the contribution is set to $6,000.
Many couples in the United States face this ultimate challenge. The recent trends of being a home-stay or unemployed parent may complicate the financial stability in the retirement period. That is why, opening a spousal IRA is a unique model for any couple in which one party does not earn enough funds to have an independent IRA.