Funding Roth IRA after retirement

[martyb]

So, I'm just about ready to retire. My wife & I each have a Roth IRA with Vanguard. I know there is a way to fund an IRA based on the spouse's income. What I need to know is the mechanics. Can I simply continue to put money into my existing Roth IRA based on my wife's income while she continues to work? Or....do I have to open a different IRA, and call it a "Spousal" IRA? Just want to know if I have to do anything different or keep some kind of different, separate records for this IRA.

 

[rescueme]

You continue to contribute to your existing IRA, regardless of "type". You don't need to set up a special "spousal" account.

As long as your wife's earnings cover contributions made to either/or/both accounts, there is no problem.

I just checked our 2008 IRA worksheet (the first full year that I had no income but DW did). Line 33 shows contributions $6K each for taxpayer/spouse columns. There is no special notation or special contribution term used.

 

[travelover]

Just continue as you have been, with the same account.

 

[martyb]

Thanks folks. Just curious....this only pertains to a Roth IRA, right? Unless I have earned income, there's no way for me to fund a traditional IRA.....right? Just wondering....

 

[Sesq]

Just make sure your contribution and your spouse's don't exceed your spouse's total income.

For example, if she worked part time and earned $5000 - that is the max between the two of you.

And no more traditional funding once you reach 70 1/2. (previously said Roth, had it backwards).

EDIT - Spousal IRA can be roth or traditional (if otherwise qualify - e.g. income limits, or access to another plan).

 

[martyb]

Just make sure your contribution and your spouse's don't exceed your spouse's total income.

For example, if she worked part time and earned $5000 - that is the max between the two of you.

And no more Roth funding once you reach 70 1/2.

EDIT - Spousal IRA can be roth or traditional (if otherwise qualify - e.g. income limits, or access to another plan).

Wife intends to work at least 2 more years beyond my retirement next month. She contributes to her 401k, but not to the IRS max. I'm trying to decide whether we'd be better off funding the Roths or doing more towards her 401k. She doesn't have a big income, but it's enough to either max the Roths or fund the 401k to about 75% of IRS max amount. With the 401k, she gets 5% company match + profit sharing.

 

[travelover]

Thanks folks. Just curious....this only pertains to a Roth IRA, right? Unless I have earned income, there's no way for me to fund a traditional IRA.....right? Just wondering....

You can do either a non deductible or deductible traditional IRA or a Roth (subject to income limits), based on your spouse's earnings.

I am in the same boat, initially did deductible IRA to save on taxes, but have switched to Roth after looking at my RMDs once I hit age 70 1/2.

 

[Alan]

You can do either a non deductible or deductible traditional IRA or a Roth (subject to income limits), based on your spouse's earnings. I am in the same boat, initially did deductible IRA to save on taxes, but have switched to Roth after looking at my RMDs once I hit age 70 1/2.

+1

DW retired before I did but we continued to contribute the max to her tIRA during the years she wasn't working.

 

[martyb]

Huh. I didn't think I could do a tira without my own earned income. News to me. I need to think things over a bit. I figured the Roth was probably doable I'm not sure if we'd be better off deferring or not deferring once I'm getting my pension. We'll be in the 15% bracket.

 

[travelover]

Huh. I didn't think I could do a tira without my own earned income. News to me. I need to think things over a bit. I figured the Roth was probably doable I'm not sure if we'd be better off deferring or not deferring once I'm getting my pension. We'll be in the 15% bracket.

Plus as I mentioned - look at your RMDs and see where that drives your tax rate.

 

[Sesq]

Wife intends to work at least 2 more years beyond my retirement next month. She contributes to her 401k, but not to the IRS max. I'm trying to decide whether we'd be better off funding the Roths or doing more towards her 401k. She doesn't have a big income, but it's enough to either max the Roths or fund the 401k to about 75% of IRS max amount. With the 401k, she gets 5% company match + profit sharing.

Does her company have a Roth 401(k)? If so, I believe you could fund the Roth 401(k), get the match (will be tax deferred) and then still have income showing up in your taxable income. You then shuffle more cash into the Roth IRA and spousal Roth IRA based on this w-2 income.

If your cash allowed it (its fungible after all), I might post that idea over at fairmark where they think about these nuances more than I do. But could be a way to make the comp count twice for purposes of retirement account funding.

 

[martyb]

Does her company have a Roth 401(k)? If so, I believe you could fund the Roth 401(k), get the match (will be tax deferred) and then still have income showing up in your taxable income. You then shuffle more cash into the Roth IRA and spousal Roth IRA based on this w-2 income.

If your cash allowed it (its fungible after all), I might post that idea over at fairmark where they think about these nuances more than I do. But could be a way to make the comp count twice for purposes of retirement account funding.

No, her company only does the regular 401k, and it's not such a great group of slections either, but better than nothing.