Located at: East Idaho Credit Union

CONNECT

Address:

Idaho Falls Branch:
865 S. Woodruff Ave
Idaho Falls, Idaho 83401

Ammon Branch:
3255 17th Street
Ammon, Idaho 83406
Affiliated Offices

Phone:

(208)535-2817

Fax/Other:

(208)523-4755

Keeping Savings on Track with a Spousal IRA

Being a stay-at-home mom or dad, or working part-time to help take care of the children, can make a big contribution to the balance and well-being of a family. Unfortunately, time out of the workforce could put the caregiving spouse at a disadvantage when it comes to retirement savings.

A spousal IRA — funded for a spouse who earns little or no income — offers an opportunity to help keep the retirement savings of both spouses on track. It also offers a larger potential tax deduction for a married couple.

IMAGE

Making Contributions

For the 2017 and 2018 tax years, an individual with earned income (from wages or self-employment) can contribute up to $5,500 to his or her own IRA and up to $5,500 more to a spouse's IRA — regardless of whether the spouse works or not — as long as the couple's combined earned income exceeds both contributions and they file a joint tax return. An additional $1,000 catch-up contribution can be made for each spouse who is age 50 or older.

Contributions for 2017 can be made up to the April 2018 tax filing deadline. All other IRA eligibility rules must be met.

Income Phaseouts

If neither spouse actively participates in an employer-sponsored retirement plan, contributions to a traditional IRA are fully tax deductible. However, if one or both are active participants, tax deductibility for joint filers phases out at a modified adjusted gross income (MAGI) of $99,000 to $119,000 for a participating spouse and $186,000 to $196,000 for a nonparticipating spouse in 2017. In 2018, the MAGI limits increase to $101,000 to $121,000 for a participating spouse and $189,000 to $199,000 for a nonparticipating spouse. Thus, some participants in workplace plans who earn too much to deduct an IRA contribution for themselves may still be able to deduct an IRA contribution for a nonparticipating spouse.

Contributions to a Roth IRA are not tax deductible and are not affected by participation in a workplace plan. However, eligibility to contribute to a Roth IRA phases out for joint filers with a MAGI of $186,000 to $196,000 in 2017 ($189,000 to $199,000 in 2018).

Distributions from traditional IRAs are taxed as ordinary income and may be subject to a 10% federal income tax penalty if withdrawn prior to age 59½. Roth IRA contributions can be withdrawn penalty-free and tax-free at any time, but in order for earnings to qualify for a tax-free and penalty-free withdrawal, a Roth IRA distribution must meet the five-year holding requirement and take place after age 59½. (There are IRS exceptions to the early-withdrawal penalty and the five-year holding requirement.)