Retirement Savings for Non-working Spouses

To build retirement savings and Social Security benefits, you generally need the types of earned income from which payroll taxes and retirement plan contributions come. But even if you never earned income, you may still qualify for certain spousal benefits.

Spousal IRA

While most tax-qualified retirement plans require owners to offset their contributions with earned income, a spousal IRA allows contributions in the names of spouses with little to no earned income. This is especially important for parents who interrupt their careers to start and care for families at the expense of income parity when they return to work.

Because women may earn less, on average, than men for doing the same work, women are often lagging in retirement readiness. A spousal IRA can help a lower-paid or even non-working spouse save for retirement, as long as the working spouse has enough income to offset contributions from both spouses.

The Rules

If you qualify by the same income limits and age restrictions that govern all IRA accounts and you file a joint federal income tax return, a spouse without any earned income can still contribute to either a traditional or Roth IRA. In 2019, the annual contribution limit is $6,000, plus an extra $1,000 if at least age 50.

Income limits, age restrictions and access to an employer-provided qualified retirement plan will determine the tax deductibility of a spousal IRA. However, owners of any IRA get to enjoy tax-deferred growth potential. Owners of traditional IRAs typically pay ordinary income tax on retirement withdrawals, while qualified distributions from Roth IRAs are tax-free.

In Retirement

Spouses with little to no lifetime income can also qualify for spousal Social Security benefits. Spousal benefits generally are half of the spouse’s benefit at full retirement age, which is 66 this year and increasing to 67 over the next few years.

If your spouse begins receiving benefits before or after full retirement age, your spouse’s — and your — monthly benefit will vary depending on when benefits begin. If you take benefits before your spouse’s full retirement age, Social Security reduces the benefit permanently. If you take benefits after this age, benefits permanently increase