The combined individual/spousal IRA contribution maxes out at $10,000 for 2009. This is an increase of $2,000 from 2007. For 2010, the increase will be based on inflation and the cost of living.
Eligibility
All IRAs don’t allow unemployed people to make contributions. However, an employed man or a woman can make deposits on behalf of their unemployed partner. This is also applicable to those whose spouse makes little money.
To qualify, one must be married. Filing income taxes must be done in a joint fashion. Your income also needs to at least equal the amount you’ll deposit in the retirement account.
For Traditional IRA, your spouse should be under 70 ½ years of age. The spousal IRA contribution rule states your spouse needs to be below this age in the year you make your deposit. For Roth IRA there are no age restrictions.
Compensation Limitations
For a Roth IRA, the limit is at $169,000. For Traditional IRA there is no ceiling. If your income is under $159,00 you can deposit up to the year’s limit. If the figure is between $159,000 to $169,000 you should speak with your tax consultant.
They will determine the deposit you can make. You can put in 100% of the compensation, but the restriction applies to your partner too.
For example: if the spousal IRA contribution maxes out at $5,000 you can’t put in more than $10,000 in the two accounts.
Catch up Limitations
The catch-up stipulation applies to those over 50 years and older.
For individuals, the amount is set at $1,000. For the two, it is $2,000. This rule applies to both Traditional and Roth accounts.
Facts about Deductions
Deducting the maximum amount is possible if the plan is not employer-sponsored. For plans like 401k, the deductibles will be based on your income. If necessary, double-check your tax status.
For those who are making a spousal IRA contribution, deducting from the two accounts may not be possible. If this is what happens with your Traditional IRA, you can open Roth IRAs instead.
Managing Two IRAs
The two accounts are distinct entities. Even if you make all the contributions, the account and documents will be under your spouse’s name and tax number. Payments can only be made with cash. Stocks and securities are not acceptable.
As with other accounts, the deposit must be made prior to April 15. If this will be done by mail, obtain a receipt. You can make the deposit in increments.
You can deposit a few hundred dollars every month until the maximum total is reached. If you make it to the tax deadline, you can make the contribution (for a year’s worth).
As stated, the catch-up and contribution limits for 2010 will rise depending on the inflation. But the other rules concerning the account may be subject to change too.
At the start of each year, check with your financial adviser. You need to be updated on the rules and any changes that might be made.
Understanding the spousal IRA contribution isn’t really that hard; it just takes a little while.
If necessary, talk with your financial adviser. This will help ensure you and your spouse get your money’s worth.