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Learn all about the unknown tax mechanism that helps married couples save for their retirement

This is the spousal IRA, an option offered by the Internal Revenue Service (IRS) and which is not very popular despite being very beneficial.


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According to a recent National Institute for Retirement Security (NIRS) survey, 79% of working-age Americans say the country is facing a "retirement savings crisis," an increase of 12 percentage points when compared to 2020. Indeed, the survey also found that more than half of those surveyed are worried about not being able to achieve financial security in retirement.

In this regard, Forbes particularly pointed out the reality of those in the middle class, who "are falling short when it comes to saving enough money for a financially secure retirement."

However, to alleviate this situation a little and especially help married couples, there is a mechanism that The Wall Street Journal described as something that could "help many couples increase their retirement savings."

"Despite the advantages, not many people know about them"

This is a spousal IRA. Unlike regular IRAs, which are nothing more than traditional accounts that allow people to contribute to a retirement account where their money is tax-deferred, The spousal IRA simply allows one member of the marriage to contribute for both.

In effect, it allows a working spouse to contribute to the retirement savings of a spouse who may not be working or has a low income. It is important to clarify that these are not joint accounts, but rather each IRA is established in the name of an individual spouse.

"Besides helping a couple contribute more to their retirement savings annually while reaping the tax advantages, these vehicles have a psychological benefit, financial planners say. (...) What’s more, when nonworking or low-earning spouses maintain such an account it offers some financial independence and ensures they have access to retirement funds should they become widowed or divorced since the assets are in their name, wealth managers say," the WSJ explained.

It is a good idea?

According to Investopedia, a specialized portal about economic information, "a spousal IRA is almost always encouraged by financial advisors as a way for married couples with uneven incomes to maximize their tax efficiency."

Stacy Miller, a certified financial planner and CEO of BayView Financial Planning in Florida, told the WSJ that there was only one problem with these types of accounts: "Despite the advantages, not many people know about them."

How do I open a spousal IRA?

Opening an account does not have many complications. First, you need to be married. Once that is crossed off the list, and taking into account that one of the two must have a low or no salary, the type of IRA to be set up is decided (it can be traditional or Roth).

Then you must choose a financial institution with which to open the account, which will request some personal information.

"Once the financial institution has created the account, you'll be cleared to fund the account (keeping in mind the contribution limits based on MAGI discussed above). Once funds are in your IRA, you'll then be able to select the specific investments you want to hold. From time to time, you'll get investment statements from your financial institution and can often leverage an online login to view your IRA balance at any time," Investopedia states.