Retired Spouse IRA Strategy

• Posted on April 25, 2008
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Long Island CPA Firm Offering Tax and Financial Advice

When one spouse works and the other does not, tax law allows the non-working spouse to base their contribution to an IRA on the income of the working spouse.

This tax benefit is frequently overlooked when spouses have been working and basing their individual contributions on their own income for years, retire and fail to recognize the opportunity to make IRA contributions for a retired spouse. Even if the working spouse has a pension plan at work and his or her income precludes him or her from making an IRA contribution, the non-working retired spouse can still make a contribution based on the working spouse’s income.

However, be careful since traditional IRA contributions, both deductible and nondeductible, are not allowed in the year an individual turns 70-½ and all subsequent years. This restriction does not apply to Roth IRA contributions.

There are some AGI limitations if the working spouse has a retirement plan at work, so please call this office to make sure you qualify before making the contribution.