Disclosure: This site contains affiliate links. If you click and sign up or make a purchase, I may receive a commission or referral bonus at no extra cost to you. I only recommend tools and resources that I believe add value to the ‘Snowball’ journey.
The picture above is from the Official IRS Website and obviously the IRS only covers US matters so this won’t apply to everyone. Also with the complexity of the tax code it is very important to read the full documentation yourself, or consult a professional CPA.
I already did some breakdowns of what Individual Retirement Accounts (IRAs) are, but in case you missed it. In simplest terms, they are buckets you fill for retirement that give you tax advantages and the ability to grow them over time via investments or to hold cash.
Today, I want to talk about the Spousal IRA — also known as the Kay Bailey Hutchison Spousal IRA. Obviously the image above from the IRS tells you the basics, but I want to go over relatable aspects.
Typically you’ll see the Spousal IRA referred to as a “Non-working Spouse” IRA, but they don’t have to be non-working. A spouse can have income lower than the requirements to cap the IRA and still be allowed to fund the full amount, provided the ‘working’ spouse’s income is high enough.
IRAs are a very powerful tool for a family and in many cases they are also an important security blanket if something negative happens in a marriage. While many states will split retirement accounts evenly there are a whole slew of things that can make that a mess. Funding your lower-income or non-working spouse’s IRA allows them to have not only that security but to grow your joint future plans exponentially.
As a non-working or non-employer sponsored person the Spousal IRA is allowed to be done 100% pre-tax unless you hit a pretty high income limit:
Why, you ask, am I posting about IRAs this week? Well because after the January Check In I realized that while my current experiment is a priority, it needs to not be the only priority. I haven’t yet capped my wife’s Spousal IRA for 2025 and need to pivot my contributions there. I am frequently on the edge of whether I can deduct my own IRA contributions based on our combined income.
As of right now, I have to funnel $1,900 more into my wife’s IRA before April 15th 2026. Myself, I still need to find $5,000 for my 2025 IRA. If we get the deductions on both of those, we’ll have saved $3,000 on taxes that can then go back to feeding the snowball experiment.
I hope that helps, now go fund your Spousal IRA!
~~Miniwing~~
Stoic, Investor, Parent, Wordsmith