- ORIGINAL NEWS
An ‘often overlooked’ retirement savings option can lower your tax bill, advisor says. Here’s how it works
- SUMMARY
For married couples filing jointly, there’s a strategy for boosting retirement savings and potentially lowering taxes called a spousal IRA.
This type of IRA is designed for the spouse who doesn’t have earned income from a job or self-employment.
Similar to traditional IRAs, contributions to a spousal IRA can provide tax benefits.
Pretax contributions made to a traditional spousal IRA can reduce your current-year tax bill, depending on your income and workplace retirement plan participation.
The process is straightforward: the working spouse contributes to both their own IRA and a separate spousal IRA.
The combined contributions cannot exceed the limits set by the IRS, which are $6,500 for those under 50 and $7,500 for those age 50 and older.
One key consideration is that the contributing spouse must have enough earned income to cover both IRA contributions.
If they don’t, the spousal IRA contributions may be limited.
Financial experts emphasize the importance of spousal IRAs for non-working spouses to take advantage of tax breaks and boost their retirement savings.
However, it’s important to weigh this strategy against other financial priorities and consider the potential impact on future taxes.
It can be a valuable addition to your retirement planning, but it’s essential to assess if it’s right for your circumstances.
- NEWS SENTIMENT CHECK
- Overall sentiment:
positive
Positive
“- A spousal IRA is a separate Roth or traditional IRA for the non-working spouse — and it’s “often overlooked,” according to certified financial planner Judy Brown at SC&H Group.”
“- Married couples who file jointly have until the federal tax deadline — April 15 for most taxpayers — to make 2023 IRA contributions for each spouse.”
Negative
“- Plus, too much pretax retirement savings could create a “tax problem” in the future, depending on the size of your accounts and future required minimum distributions, Mattia said.”
“- Pretax withdrawals boost income, which can affect Medicare Part B and Part D premiums, among other consequences.”