How Stay-at-Home Spouses Can Save for Retirement

How Stay-at-Home Spouses Can Save for Retirement

March 22, 2021

Over the past year, massive layoffs and the need for parents to supervise their children’s online schooling have created more households where at least one parent is not working for a company—and therefore isn’t able to participate in an employer retirement plan.

It's important for both spouses to try to contribute toward their own retirement. But as a non-working spouse, your options are limited. But there is one tool you should know about: The "spousal IRA."

Special rules let a non-working spouse fund an IRA even if they aren’t earning income. This is crucial, because with regular contributions over time, a spousal IRA could become an important source of retirement income.

How does it work?

Normally, to contribute to an IRA, you must have compensation at least equal to your contribution. But if you're married, file a joint federal income tax return, and earn less than your spouse (or nothing at all), the amount you can contribute to your own IRA isn't based on your individual income. It's based instead on the combined compensation of you and your spouse.

For example, Mary (age 45) and Joe (age 50) are married and file a joint federal income tax return for 2021. Mary earned $100,000 in 2021 and Joe, at home taking care of their children, earned nothing for the year.

Mary contributes the maximum of $6,000 to her IRA for 2021. Even though Joe has no compensation, he can contribute up to $7,000 to his own IRA for 2021 (that includes a $1,000 "catch-up" contribution), because Mary and Joe's combined compensation is at least equal to their total contributions ($13,000).

The spousal IRA rules only determine how much you can contribute to your IRA. It doesn't matter where the money you use to fund your IRA actually comes from.  You're not required to track the source of your contributions. And one spouse does not need the other's consent to establish or fund a spousal IRA.

The spousal IRA rules don't change any of the other rules that generally apply to IRAs. You can contribute to a traditional IRA, a Roth IRA, or both, provided you don't exceed the annual contribution limits. And your ability to make annual contributions to a Roth IRA may be limited depending on the amount of your combined income. If you’re not sure which kind of IRA you’re eligible for, a financial advisor can help you understand your options.




Dan Flanagan is a financial advisor and Partner located at Canby Financial Advisors, 161 Worcester Road, Framingham, MA 01701. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 508.598.1082 or

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances.