Generally, if you don't earn any income, you can't contribute to either a Roth or traditional IRA. However, in some cases, married couples filing a joint return may make IRA contributions based on the taxable compensation reported on their joint return. A spouse who does not earn a salary can also save for retirement. As long as the other spouse is working and the couple files a joint federal tax return, the non-working spouse can open and contribute to their own traditional or Roth IRA.
A non-working spouse can contribute to a spousal IRA as much as the family's wage earner. Email address cannot exceed 100 characters. You have successfully subscribed to the weekly Fidelity Viewpoints email. You should start receiving the email within 7-10 business days.
Fidelity Brokerage Services LLC, Member of NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917. The amount of your combined contributions cannot exceed the taxable compensation reported in your joint return. If neither you nor your spouse (if any) participate in a work plan, your traditional IRA contribution is always tax-deductible, regardless of your income. Previously, if you converted another tax-advantaged account (Simplified Employee Pension (SEP) IRA, Employee Savings Incentive Match (SIMPLE) IRA, traditional IRA, 401 (k), or 403 (b) plan) into a roth IRA and then changed your mind, you could undo the action in the form of a requalification. For those whose income exceeds the limits of a maximum contribution, the IRS provides a worksheet to help determine how much they can contribute to a Roth IRA.
If you did not receive workers' compensation but made a contribution to your IRA anyway, the amount you contributed will be subject to the 6 percent penalty tax on excess contributions. For married couples who file taxes jointly, there is an exception to the rule that requires you to have earned income to contribute to an IRA. A couple must file a joint tax return for the spousal IRA to work, and the domestic partner must have enough earned income to cover both contributions. Learn more about the requirements to contribute to a Roth IRA, including the adjusted gross income limit and the maximum that can be invested annually, and the sliding scale of how much you can invest based on adjusted gross income (AGI).
Couples with very disparate incomes may be tempted to add the name of the highest-earning spouse to a Roth account to increase the amount they can contribute. You can generally withdraw excess contributions without penalty as long as you withdraw them by the due date of your tax return in the year you made the contributions. A Roth Individual Retirement Account (IRA) can be a great way to save money for your retirement years. Of course, as with other tax-advantaged retirement plans, the Internal Revenue Service (IRS) has specific rules regarding Roth IRAs.
To continue learning about the power of retirement accounts, check out 4 no-penalty ways to use a Roth IRA before retirement. The only downside is that you can't contribute to a Roth IRA when you have a high income and exceed annual income thresholds. While not tax-deductible, contributions to a Roth IRA give you the opportunity to create a tax-free savings account. .