Even if you do not work, you may be able to open an IRA. here’s how

If you are not working and are married, you may be leaving tax-deductible money on the table, money that could be used for your retirement savings.

While you usually need income to open an individual retirement account, there is an exception for married spouses who file their taxes jointly. This is a spousal IRA, but it is simply a traditional or Roth IRA in the name of the non-working spouse, in which both partners can contribute.

A lot of people don’t realize the benefit is available to them, said Carolyn McClanahan, Certified Financial Planner, MD and Founder and Director of Financial Planning at Life Planning Partners, based in Jacksonville, Fla.

“They are happy to make their 401 (k),” she said. “Many people do not think to open their own IRA and benefits of the IRA.”

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Individuals can contribute up to $ 6000 in 2021 or $ 7000 if they have 50 or more years. This means that for married couples who file jointly, they can contribute a combined maximum of $ 12,000 or $ 14,000 this year. The working spouse must have an income equal to or greater than the total contributions.

During this time, if you’ve been working and already have an IRA, but then stopped working, there’s no need to open a new IRA for spousal contributions. These can be incorporated into your current IRA.

Of course, there are some limits.

If the working spouse is not offered a qualified retirement plan through their employer, there is no income limit for making a spousal IRA.

If they have the option of opting for a 401 (k) or other employer-sponsored plan, tax-deferred salaries may be reduced, depending on the couple’s income (detailed here).

“For anyone who doesn’t have to worry about income thresholds and can make a spousal IRA contribution, this is an extremely powerful tax deduction,” said Travis Hood, Chartered Accountant at Kahan, Steiger & Company, based in Stamford, Connecticut.

“You fund your own retirement and you get a deduction for funding your own retirement.”

For example, by saving $ 6,000 each year for 30 years at an interest rate of 5%, you will save over $ 400,000 for retirement. This is on top of whatever the working spouse saves in their retirement account.

To be sure, it doesn’t matter if you can get a full or partial deduction, the worker’s pension contributions aren’t affected, so if it’s a 401 (k) they can still contribute up. 19 500 $ in 2021, more decision-6 -acompte $ 500 if more than 50 years.

Even if your income doesn’t entitle you to tax-deductible contributions, that doesn’t mean you can’t put money aside in a spousal IRA. You just don’t get the deduction.

“You still get tax-deferred growth in that IRA,” he noted. “Whenever you can defer paying income tax, it’s generally safe to do so.”

Not only does this money grow tax-sheltered, it is also a creditor-protected asset, said McClanahan, a member of the CNBC Financial Advisor Council.

“It’s a way to put more money aside where you don’t have to worry that it will never be taken from you for any reason,” she said.

Roth IRAs are very attractive because contributions are made after tax and therefore you don’t have to pay tax when you withdraw the money in retirement.

However, they have income limits. Married couples who file jointly can contribute up to $ 6,000 or $ 7,000, depending on their age, if they earn less than $ 198,000. They can contribute a reduced amount if they earn between $ 198,000 and $ 208,000.