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Can a retiree contribute to an IRA if spouse is still working?

I'm 65 and newly retired. My wife is 58 and still working full-time. She contributes the max $13,000 to her company's 401k. Can both of us still contribute the max amount to our IRAs as well?

Apr 03, 2012 by Otto from Overland Park, KS in  |  Flag
4 Answers  |  4 Followers
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3 votes

Hi Otto,

Congrats on your retirement, and I applaud your strong savings.

The simple answer is yes. As long as your wife has earned income in excess of $12,000 - then yes, you BOTH can contribute the maximum amount to traditional IRA's based upon the information that you've detailed.

However, - you may not be able to actually DEDUCT those contributions, depending upon your income. You should check with your CPA or tax professional on this. If you are receiving money from a pension plan - or you contributed to a 401(k) this year, then you are still considered an active participant in a retirement plan, and as such, the deductibility of IRA contributions will phase out with increasing income levels. If you are not considered an active participant - then your wife surely still is, so income thresholds will still apply, but they are a bit more lenient.

In the event that you CANNOT deduct your IRA's, you might want to check to see if you are eligible to contribute to a Roth IRA. All contributions to Roth IRA's are after-tax dollars, and, in your particular case, withdrawals will be tax-free after 5 years; earlier if you already have a Roth. Additionally, Roth IRA's do not have any Required Minimum Distributions after you reach age 70 and 1/2. For these reasons, if you cannot deduct your contributions to an IRA, the Roth IRA is considered to be a vastly superior alternative.

Jon Castle http://www.wealthguards.com

1 Comment   |  Flag   |  Apr 03, 2012 from Jacksonville, FL
Jonathan N. Castle, MSFS, CFP®

The reference for Spousal IRA contributions is: http://www.irs.gov/publications/p590/ch01.html#en_US_2011_publink1000230412 IRS Publication 590. Scroll down to "How Much Can Be Contributed" and then "Spousal IRA." They also have several examples to walk you through it. But yes - as long as your wife has enough earned income to cover BOTH of your contributions - Go For It.

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Flag |  Apr 03, 2012 near Jacksonville, FL

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2 votes

Hi Otto...congratulations on your retirement. Unless you have earned income you cannot contribute to an IRA. Since your wife is over 50 she can contribute $17000 plus $5000 catchup for a total of $22000 to her 401(k) plan.

2 Comments   |  Flag   |  Apr 03, 2012 from Green Bay, WI
Tony Krance, MBA, CFP®, AIF®

Otto...since you stated $13000 max your wife may have a Simple IRA at work. If this is the case, the max for 2012 is $14000 with catchup.

Flag |  Apr 03, 2012 near Green Bay, WI
Tony Krance, MBA, CFP®, AIF®

ooops....missed the spousal IRA deduction exemption.

Flag |  Apr 03, 2012 near Green Bay, WI

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2 votes

Hi Otto,

If her income exceeds the the maximum allowed, then the answer would be yes for a traditional IRA. Also, depending on your AGI, contributions may be deductible for doing so.

If her income is under the limits, you may want to consider a ROTH IRA. While you wouldn't get a deduction now, it could help you manage the amount of "Required Minimum Distributions" (RMD) you would need to start taking in 6 years. With a ROTH, you do not need to take RMDs starting at 70-1/2.

For more information, look at:

http://www.irs.gov/retirement/article/0,,id=111413,00.html

Comment   |  Flag   |  Apr 03, 2012 from Permanente, CA

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2 votes

Yes, you can make an IRA contribution of up to $5,000 for 2012 (plus another $1,000 since you are over age 50) provided you and your wife file a joint return and your wife’s earned income equals or exceeds your combined IRA contributions. The deductibility of your IRA contribution, as the nonworking spouse, for 2012 is phased out for couples with adjusted gross income (AGI) between $173,000 and $183,000 (because you are classified as the non-working spouse). Your wife, as the working spouse, has the ability to make a deductible contribution for 2012 but it is phased out between AGI of $92,000 and $112,000.

Comment   |  Flag   |  Apr 03, 2012 from Point Pleasant Beach, NJ

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