Are you looking to lower your 2023 tax bill or boost your refund? One lesser-known retirement savings strategy for married couples could help you do just that. It’s called a spousal IRA, and it’s a separate Roth or traditional IRA for the non-working spouse.
According to certified financial planner Judy Brown, many couples overlook the spousal IRA, but it can provide a current-year tax break and boost retirement savings for nonearning spouses. With 18% of parents not working outside the home, and most stay-at-home parents being women, taking advantage of a spousal IRA could make a significant impact on your financial future.
Married couples who file jointly have until the federal tax deadline to make IRA contributions for each spouse, assuming there’s enough earned income for the deposits. Traditional pretax spousal IRA contributions can provide a tax break, depending on income and workplace retirement plan participation.
The annual IRA contribution limit for 2023 is $6,500, or $7,500 for savers age 50 and older. Even a small contribution to a spousal IRA could provide tax savings, so it doesn’t have to be an all or nothing decision.
However, it’s important to consider all factors before making deposits to a spousal IRA. Some couples may need the extra cash for living expenses or shorter-term goals, and too much pretax retirement savings could create a tax problem in the future.
Ultimately, whether a spousal IRA is right for you depends on your individual financial situation. But if you’re a nonearning spouse, it’s worth exploring this strategy to potentially lower your tax bill and boost your retirement savings.
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