Spousal IRA Rules And Contribution Limits

Spousal Ira

What is a spousal IRA, and what are the rules and contribution limits for this type of account? Normally a contribution to an IRA must come from taxable income that the account holder has, and if you have no taxable income then you can not make a contribution and secure your retirement cash flow. There is an exception to this rule though, and that is for a spouse who stays at home as long as the married couple files a joint tax return. Spousal IRA rules outline that a spouse do not need to have taxable income to contribute to this type of account, as long as the partner has enough taxable income to cover the contribution to all IRA accounts during the year.

Simple IRA contribution limits and contributions allowed for the spousal form of this plan may be different. With a spousal IRA the contribution limit is the limit set by the IRS for any IRA account type, and in 2011 this amount is five thousand dollars. The IRA withdrawal rules will apply to every account, regardless of which spouse holds the account. For the stay at home spouse to have an IRA the account can not be jointly held, it must be in the name of the spouse with no taxable income and under their tax identification number.

Once funds are contributed to the spousal IRA, the account balance can not be withdrawn by anyone but the account holder. It is possible for both of the spouses to open both a Roth and a traditional IRA account, so that each spouse has multiple IRAs, but the total contribution for each spouse can not exceed the IRS contribution limits for the year across all the IRA accounts held by that specific spouse. The account holder can not be more than seventy and one half years old when the account is started either. If one spouse stays at home and the other is a business owner then the simple IRA rules may make the process even easier for both spouses to have an account.