You may be wondering what your options are for a joint Roth IRA if you’re married and saving for retirement with your spouse. Such an investment option doesn’t exist, but there are nonetheless some ways that couples can invest for retirement together.
You Can’t Open a Joint Roth IRA With a Spouse
It’s understandable that you might want to combine retirement savings efforts with your spouse by contributing to the same Roth IRA, but there’s no such thing as a joint Roth IRA.“Everyone likes to streamline their finances as much as possible,’’ financial advisor Chris Gure of Fortress Financial Partners explained to The Balance via email. “The Internal Revenue Service (IRS) does add a layer of complexity by limiting IRA accounts to each individual. Married clients will each have their own IRA, and even though we often recommend a spousal IRA, this is still a different account.”
Using a Spousal IRA Instead of a Joint Roth IRA
You do have an option when it comes to investing in a Roth IRA with your spouse. You must generally earn taxable income to qualify to contribute to an IRA. But even a non-earning spouse can have an IRA of their own with a spousal IRA. Your spouse’s taxable income will qualify you to make a contribution to a Roth or traditional IRA if you file your tax return jointly. Both you and your spouse are able to do so as long as it doesn’t surpass the contribution limit for the year. You can each contribute up to $6,000 to a traditional IRA, or $7,000 if you’re age 50 or older in 2022. The additional $1,000 is considered a “catch-up contribution.” The limits increase to $6,500 and $7,500 for tax year 2023 because they’re periodically adjusted for inflation. But these limits can’t exceed your taxable compensation. Your limit is your compensation if you earn less. A spousal IRA gives spouses an option for saving for retirement and to work toward their financial goals together even if one spouse doesn’t work.
How To Open a Spousal IRA as a Roth IRA
You’ll have to open a Roth IRA or a traditional IRA before you can open a spousal IRA. A major factor in deciding which type of IRA to open will depend on your income. Roth IRAs have limits that are based on your modified adjusted gross income (MAGI). You’re unable to contribute to a Roth IRA if your income surpasses the limit. Traditional IRAs don’t have income limits, which can make it the only IRA option for couples who earn more than $214,000 when filing jointly in 2022. But this threshold increases, too, in 2023, going up to $228,000. Each brokerage will have a unique application process, but you can generally expect to go through the following steps to open a spousal IRA:
Provide necessary documentation and information: You’ll be expected to provide the brokerage with any personal information and documentation it requests to open any type of IRA account. This includes your Social Security number, driver’s license number, employer information, and statement information regarding any cash or assets you plan to transfer into your IRA, along with beneficiary information. Make your first deposit and set up an initial one: Some brokerages will require a minimum amount for your initial deposit, but others won’t. You’ll likely want to make an initial deposit either way and follow it up with a recurring deposit that can come directly from your bank account. Choose investments: The brokerage will help you pick out your investments if you have a professionally-managed account. You might also choose a self-directed account and decide how to invest your own contributions.
Inheriting a Spouse’s Roth IRA
Most IRAs are somewhat joint by default because the surviving spouse will inherit it after death unless it’s specifically designated to another person. The surviving spouse will have the option to treat the IRA as their own by designating themselves as the account owner, or they can roll it over into their own existing IRA. There are some key rules around distributions when it comes to inheriting a Roth IRA. All the interest held in a Roth IRA is generally required to be distributed by the end of the fifth calendar year after the year that the owner of the account passes. But a spouse can choose to delay distributions until their spouse would have turned age 70½ if a spouse is the sole beneficiary of the account. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
