While planning for retirement, many couples look at several investment options in order to make the most of their assets and ensure a stable financial future. A Roth IRA is a popular type of retirement savings account, and both individuals in a couple who meet the eligibility requirements can open and contribute to their own Roth IRAs.
Though a married couple can have two Roth IRAs, there are some things to take into consideration, such as contribution limits, certain rules that may pertain to married couples, and more.
Rules for Married Couples and Roth IRAs
Married couples who want to use Roth IRAs to save as much money as possible for retirement must follow certain rules.
Roth IRAs, or Roth individual retirement accounts, are, as the name suggests, designed for individuals, and so they cannot be opened as a joint account. However, as long as a married couple meets the income requirements (more on that below), each spouse can open and contribute to a Roth IRA. A couple can still contribute to two different Roth IRAs even if one of them does not have earned income by opening a spousal IRA for the non-working spouse, assuming they’re filing their tax returns jointly.
The combined total of a married couple’s IRA contributions cannot be more than the sum of each person’s annual cap. In 2024, individuals can contribute a maximum of $7,000, or $8,000 for those 50 years of age and above. So, if both spouses were 50, they could potentially contribute up to $16,000 to their IRAs altogether for the year.
But again, the full amount a couple can contribute as well as their eligibility for contributing to an IRA depends on a few factors, including their income, age, and whether they’re contributing to a traditional or Roth IRA. For a Roth IRA, their modified adjusted gross income (MAGI) for the year must be less than $230,000 in order to be able to contribute the full amount. Knowledge of these IRA guidelines can help married couples optimize their retirement savings plan.
💡 Quick Tip: Want to lower your taxable income? Start saving for retirement with a traditional IRA. The money you save each year is tax deductible (and you don’t owe any taxes until you withdraw the funds, usually in retirement).
Can Married Couples Have Two 401(k)s?
Married couples can also have two 401(k) plans. Since 401(k)s are employer-sponsored retirement accounts, each spouse would have their own, through their respective employers, and contribute to each plan separately. Similar to IRAs, there would be contribution limits and strategies to consider when maxing out each 401(k), but it is possible that a married couple could and would have two 401(k)s.
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Different Types of IRAs
There are different types of IRAs you might consider for your retirement plan — whether you’re married, or not. These may include, for example, traditional, Roth, SEP, and SIMPLE IRAs.
The IRA plans that are perhaps most common are traditional and Roth IRAs. Both provide tax advantages and are in many ways similar. Withdrawals made before age 59 ½ from both accounts may be subject to taxes and a 10% penalty (though in the case of a Roth IRA, this applies only to earnings, not contributions).
However, they also have important distinctions. Traditional IRAs enable you to contribute pre-tax funds, which grow tax-deferred within the account, and are then later taxed as regular income upon withdrawal. Roth IRAs enable you to contribute after-tax dollars, which grow tax-free in the account. You generally won’t have to pay taxes on contributions or earnings when you make qualified withdrawals in retirement.
Simplified employee pension (SEP) IRAs or SIMPLE IRAs may be good options for the self-employed, small business owners, and their employees.
The differences between retirement savings and investment vehicles can get even more granular, too. But for many people, knowing the basic differences between traditional vs Roth IRAs can be a good place to start.
Understanding Roth IRA Contribution Limits
To get the most out of a Roth IRA savings plan, you should be aware of its contribution limits for individuals and married couples. Here’s a breakdown:
• Again, the yearly contribution cap for people under 50 is $7,000 in 2024; those 50 and over can pay an extra $1,000 as a catch-up contribution, for a total contribution cap of $8,000.
• These caps apply to each individual’s Roth IRA, so based on the ages of each spouse, a married couple may be able to contribute up to $14,000 or $16,000 overall.
• There are also income restrictions based on modified adjusted gross income (MAGI) that impact eligibility for making contributions to a Roth IRA:
◦ Married couples filing jointly with a combined MAGI of less than $230,000 may contribute up to the full contribution limit.
◦ Married couples filing jointly with a combined MAGI between $230,000 to $240,000 may contribute a reduced amount.
◦ Married couples filing jointly with a combined MAGI of $240,000 or more are not permitted to contribute to a Roth IRA.
Understanding these limits can help spouses choose the retirement options that are best for them.
💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.
Tax Considerations for Spousal Roth IRAs
In order to set up a spousal IRA for a non-working spouse, a married couple must file their taxes jointly. A spousal IRA, again, permits the non-earning spouse to make contributions based on the income of the working spouse.
It’s important to know that contributions to both Roth IRA accounts cannot exceed the taxable income of the employed spouse. Contributions cannot come from gifts or investment money.
Couples should also pay close attention to the modified adjusted gross income (MAGI) restrictions for Roth IRAs. Again, per 2024 limits, they can only contribute a reduced amount to a Roth IRA when their household MAGI reaches $230,000, and they are not permitted to contribute any funds when it reaches $240,000.
Overall, a spousal Roth IRA is not that different from a typical Roth IRA. Since a Roth IRA contribution is made with after-tax money, a couple cannot take an immediate tax deduction. The benefit of this, however, is tax-free growth and tax-free withdrawals during their retirement years.
Maximizing Roth IRA Contributions
Familiarity with Roth IRA rules and contribution limits can help married couples plan strategically to both maximize annual contributions and ensure that both spouses may benefit from these retirement accounts.
For example, it’s a good idea for a couple to keep an eye on their combined household income in order to plan for their potential contribution amounts. Spouses who know their combined MAGI will be less than $230,000 can each plan to contribute the full contribution amount in a single year in order to boost their retirement savings.
If a couple anticipates that their combined MAGI may reach the phase-out range of $230,000 to $240,000, they may need to modify their contributions or look for ways to lower their taxable income, such as by raising contributions to employer-sponsored retirement plans or giving to charities.
Additionally, keeping in mind that a spousal Roth IRA is an option if one spouse is not earning income can help each spouse build retirement savings.
Roth IRA eligibility considerations and tax laws are complex, so it’s wise to consult with a professional to better understand your options for retirement investing and saving.
Roth IRA Investment and Withdrawal Strategies
It may be wise to use some simple investment strategies to optimize your IRA investment and withdrawals — to try and maximize returns and lower risk. First and foremost, it can be a good idea to try and diversify your Roth IRA’s holdings, insofar as it fits your time horizon, risk tolerance, and retirement objectives. For instance, that may include, but not be limited to, investing in index funds and ETFs, rather than individual stocks
Further, it may be a good idea to consider regularly assessing and rebalancing your portfolio, be it your IRA, or your portfolio at large (which would include your Roth IRA). Rebalancing may help mitigate risk, and ensure that your investment mix aligns with your broader goals.
Further, it’s critical to understand the rules regarding withdrawals, in order to prevent paying taxes and fines. Remember: Roth IRAs let you contribute after-tax dollars, which grow tax-free. So, you won’t need to pay taxes on contributions or earnings when you make qualified withdrawals. Again, it may be helpful to consult with a financial professional if you have specific questions about taxes or fines.
The Takeaway
A married couple can have two Roth IRAs, but it’s important that they take a few things into consideration, including their overall or gross income level, and contribution limits. Given that each couple’s financial circumstances are likely to be different, you may need to think carefully about your own specific situation.
Further, it can be a good idea to try and incorporate sound, yet simple investment strategies when investing in a Roth 401(k). That can include diversification, regular reallocation or rebalancing, and more.
Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
FAQ
What are the individual and spousal Roth IRA contribution limits?
For 2024, the maximum amount an individual under age 50 can contribute to a Roth IRA is $7,000, or $8,000 for those over 50. For a married couple, these restrictions apply to each spouse individually.
How do filing taxes jointly or separately impact Roth IRA eligibility?
Filing taxes jointly may affect Roth IRA eligibility by allowing both spouses to contribute based on combined income, whereas filing separately may limit or disqualify eligibility due to lower income levels and stricter MAGI requirements. It may be complicated depending on your situation, so it may be a good idea to speak with a financial professional.
Can a married couple maximize their Roth IRA contributions each year?
Yes, if a married couple meets the income requirements and files their taxes jointly, they can maximize their annual contributions to a Roth IRA by each contributing up to the individual limit.
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