Retired Spouse IRA Strategy

When one spouse works and the other does not, tax law allows the non-working spouse to base their contribution to an IRA on the income of the working spouse.

This tax benefit is frequently overlooked when spouses have been working and basing their individual contributions on their own income for years, retire and fail to recognize the opportunity to make IRA contributions for a retired spouse. Even if the working spouse has a pension plan at work and his or her income precludes him or her from making an IRA contribution, the non-working retired spouse can still make a contribution based on the working spouse's income.

However, be careful since traditional IRA contributions, both deductible and nondeductible, are not allowed in the year an individual turns 70-½ and all subsequent years. This restriction does not apply to Roth IRA contributions.

The maximum deductible IRA contribution for an individual who is not an active participant, but whose spouse is an active participant, is phased out for the non-active participant based upon their combined AGI. See the AGI phase-out limits in the table below.

Year	Phase-Out Range
2015 2016 2017 2018	183,000 - 193,000 184,000 - 194,000 186,000 - 196,000 Inflation Adjusted

Example - Phase Out for Joint Taxpayers - Sandra actively participates in a retirement plan at work, but her husband, Tim, is not involved in any plan. The couple has a combined AGI of $200,000 for 2013.

Result: Sandra: No Traditional IRA deduction due to her active participation in another plan and AGI is over $115,000. Tim: No Traditional IRA deduction because combined AGI is over $188,000. Assume that the couple's combined AGI was only $125,000.

Result: Sandra: No Traditional IRA deduction due to her active participation in another plan and AGI is over $115,000. Tim: No active participation & AGI under $178,000. Deductible Traditional IRA is allowed.

If you have questions related to qualifying for a deductible IRA contribution, please call this office.

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