What is a Traditional Spousal IRA?

Yes, it is deductible! No Personal Income needed!

My world turned upside down when I learned about the Financial Independence community.  I have mentioned briefly about it.  More to come.   One of the biggest benefits to the community is learning about the Traditional Spousal IRA.  I had no idea!

I’m a SAHM (Stay At Home Mom) so I personally don’t have a 401k plan at this time, my husband does.

Yes, the Traditional IRA contribution can be tax deductible and no you don’t need personal income to contribute to it.

What?! Really?  Yes!

I have mentioned the Spousal IRA in my post  Financial Independence – Step by Step Guide on Contributing to Retirement Accounts:

What is a Traditional Spousal IRA contribution?

Let’s look at the source the IRS.  Per their website on IRAs this is what they say:

Spousal IRAs

If you file a joint return, you may be able to contribute to an IRA even if you did not have taxable compensation as long as your spouse did. The amount of your combined contributions can’t be more than the taxable compensation reported on your joint return. See the formula in IRS Publication 590-A.

If neither spouse participated in a retirement plan at work, all of your contributions will be deductible.

You have a choice you can contribute to a Roth IRA or a Traditional IRA.  You can even split between the two.  Most experts in the FI community highly recommend the Traditional IRA since it lowers your tax liability up front while you are earning a higher income.

See the formula in IRS Publication 590-A.  Scroll down and find the table 1-3:

Table 1-3. Effect of Modified AGI1 on Deduction if You Are NOT Covered by a Retirement Plan at Work

If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction.

IF your filing
status is …
AND your modified adjusted gross income (modified AGI) is … THEN you can take …
head of household, or
qualifying widow(er)
any amount a full deduction.
married filing jointly or separately with a spouse who is not covered by a plan
at work
any amount a full deduction.
married filing jointly with a spouse who is covered by a plan
at work
$184,000 or less a full deduction.
more than $184,000
but less than $194,000
a partial deduction.
$194,000 or more no deduction.
married filing separately with a spouse who iscovered by a plan
at work2
less than $10,000 a partial deduction.
$10,000 or more no deduction.

Why is a Traditional IRA that is deductible better than a Roth?

Great question!  It depends on your tax rate and income.  If you are in a high tax rate to me it is a no brainer to contribute to the Traditional spousal IRA because it will lower your income taxes now!  The plan in retirement is to be in a lower tax bracket.   In a lot of cases the $5,500 contribute can lower your taxes more then $1000.  That is a lot of tax savings.

If your income is already very low like in the 10% or less tax rate then it may make sense to put the money into a Roth.

Most experts in the FI community highly recommend the Traditional IRA since it lowers your tax liability up front while you are earning a higher income.

A great article to read is Traditional IRA vs. Roth IRA – Madfientist

How do you contribute to it?

It is NOT a joint account or a special IRA.  You just contribute the $5,500 in the spouse’s Traditional IRA account and then report it on your joint tax return.

Additional information:

Searching I found this article that talks about it!

The info is out there.  I want more people to know!


David Ramsey blog has an article:  https://www.daveramsey.com/blog/how-to-save-for-retirement-stay-at-home-parent

Money US News talks about this back in 2016:   https://money.usnews.com/money/blogs/on-retirement/articles/2016-04-27/retirement-planning-for-stay-at-home-moms


For more details I highly recommend reading:

The Simple Path to Wealth by JL Collins – Stock Series

The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits) Hardcover by John C. Bogle

The Bogleheads’ Guide to Retirement Planning by Taylor Larimore,‎ Mel Lindauer,‎ Richard A. Ferri,‎ Laura F. Dogu

The Bogleheads’ Guide to Investing by Taylor Larimore,‎ Mel Lindauer,‎ and Michael LeBoeuf

Traditional IRA vs. Roth IRA – Madfientist

Note: These are my opinions. I’m not a tax professional or financial advisor.  Do this at your own risk.

I hope this answers some of your questions just like the ones I had.

Happy Savings!   Holly