A spouse who doesn't earn a salary can also save for retirement. As long as the other spouse is working and the couple files a joint federal income tax return, the non-working spouse can open and contribute to their own traditional or Roth IRA. A spouse who doesn't work can contribute to both a spousal IRA and a family employee. The email address cannot exceed 100 characters.
You have successfully subscribed to the weekly Fidelity Viewpoints email. You should start receiving the email within 7 to 10 business days. Fidelity Brokerage Services LLC, NYSE Member, SIPC, 900 Salem Street, Smithfield, RI 02917. And if you're one of the many workers who simply don't have access to a work-related retirement plan, an IRA may be your best option for saving for retirement. To keep married couples from falling too late in saving for retirement, Congress created a special type of IRA called a spousal IRA.
The so-called spousal IRA is the same as any other Roth IRA, except that it is your spouse's income that determines whether you qualify for a Roth IRA based on maximum income limits.
When it's time to pay taxes, all you have to do is declare your contribution to a traditional non-deductible IRA by completing IRS Form 8606, non-deductible IRAs.In order to contribute anything to an IRA, IRS rules require that you earn taxable compensation for your work. If you are married and you file a joint return, only one of you must have earned income to be able to contribute to both you and your spouse's IRAs. You can't make any contributions to an IRA if your income consists entirely of unearned taxable income from sources such as rental properties, interest and dividends, pensions or annuities, or income from passive companies.
While it can be nearly impossible to convince a teenager who has income from mowing the lawn or caring for children to deposit a portion of it in a retirement account, giving money away to cover the contribution to a child or grandchild may be the answer so that they can keep all of their income and still have something to save. If neither you nor your spouse (if any) participate in a work plan, then your traditional IRA contribution is always tax-deductible, regardless of your income. If you are self-employed or have income from self-employment, you can open a simplified pension plan for employees, better known as a SEP IRA. However, you can contribute to a spousal IRA on behalf of a spouse who doesn't work based on how much the working spouse earns.
This allows the spouse who doesn't earn money to continue saving for retirement without losing the tax advantages of an IRA. Helping a young person fund an IRA, especially a Roth IRA, can be a great way to start saving for retirement. This is due to an IRS rule that calculates your tax liability based on all your traditional IRA assets, not just the after-tax contributions to a non-deductible IRA that you specifically configured to convert it into a Roth. If your child earns income, perhaps as a camp counselor or from a job and study at the university, you can contribute to an IRA.
Keep in mind that, once the account has been transferred, the new account owner can withdraw assets from it whenever they want, so be sure to inform your child about the benefits of allowing it to grow over time and about the rules that govern Roth IRAs.