“Take Control of Your Retirement: How Non-Working Spouses Can Benefit from Opening an IRA”
As a non-working spouse, it can be easy to feel left out of the financial planning process. However, opening an individual retirement account (IRA) is a great way for you to take control of your financial future and ensure that you have enough savings to support yourself in retirement.
In this post, we’ll explore the benefits of opening an IRA as a non-working spouse and provide step-by-step instructions on how to get started.
Why Open an IRA as a Non-Working Spouse?
If you’re not currently earning income from work, you may assume that saving for retirement isn’t something you need to worry about. However, there are several reasons why it’s important for non-working spouses to open an IRA:
1. Boost Your Retirement Savings
By opening an IRA, you can start building up your own personal nest egg for retirement. Even if your spouse has their own 401(k) or other employer-sponsored plan, having additional savings in an IRA will give you more flexibility in retirement and help ensure that both partners are financially secure.
2. Take Advantage of Tax Benefits
Contributions to traditional IRAs are tax-deductible up to certain limits ($6,000 per year in 2021), which means that contributing could lower your taxable income and save money on taxes now. Additionally, both traditional and Roth IRAs grow tax-free until withdrawal.
3. Keep Control Over Your Retirement Assets
By having your own separate IRA account, you maintain control over those assets even if something were to happen with your partner’s accounts (e.g., divorce or death). This ensures that you have access to funds when needed without relying solely on spousal accounts.
4. Build Credit History
Opening an IRA shows lenders that you’re responsible with money and can help build credit history should the need arise later on down the line.
How To Open An IRA As A Non-Working Spouse
Now that we’ve covered the benefits of opening an IRA as a non-working spouse, let’s walk through the steps to get started.
1. Choose a Type of IRA
There are two types of IRAs: traditional and Roth. Traditional IRAs offer tax-deductible contributions but taxes will be due when you withdraw money in retirement. Roth IRAs allow for after-tax contributions that grow tax-free and qualified withdrawals are also tax-free in retirement.
2. Find a Provider
Once you have chosen the type of IRA that suits your needs best, it’s time to find a provider. Many financial institutions offer IRA accounts including banks, credit unions, brokerage firms, and robo-advisors like Betterment or Wealthfront.
3. Gather Your Documentation
To open an IRA account as a non-working spouse, you’ll need to provide some documentation including:
– Social Security number
– Your spouse’s name and Social Security number
– A copy of your marriage certificate
– Proof of identity (e.g., driver’s license or passport)
4. Fill Out The Forms
Once you’ve gathered all necessary documents, fill out the application forms provided by your chosen institution to open an account.
5. Make Contributions
After successfully opening your new account(s), make sure to start contributing regularly! You can contribute up to $6,000 per year (in 2021) into either type of IRA until age 50; from there on out it increases annually based on inflation adjustments.
Tips for Maximizing Your Non-Working Spouse Contribution Limits
Now that you know how easy it is to open an IRA as a non-working spouse let’s explore some tips for maximizing your contribution limits:
1. Use Catch-Up Contributions
If you’re over age 50, then catch-up contributions are available which means you can contribute more than $6k per year ($7k in 2021). This allows older individuals who may not have saved as much in their younger years to catch up and save more for retirement.
2. Consider a Spousal IRA
If your spouse is earning income from work, they can make contributions on your behalf. Known as a spousal IRA, this type of account will allow you to contribute even if you’re not currently working.
3. Automate Your Contributions
Set up automatic contributions so that money is automatically withdrawn from your bank account and deposited into your IRA each month. This helps ensure that you’re regularly saving for retirement without having to think about it too much.
4. Re-Evaluate Your Budget
If you find yourself struggling to make regular contributions or max out the contribution limit, then it may be time to re-evaluate your budget and see where you can cut back spending elsewhere in order to prioritize savings towards retirement.
Conclusion
Opening an IRA as a non-working spouse is an easy way to start building wealth and securing your financial future. By taking advantage of tax benefits, keeping control over assets, building credit history, maximizing contribution limits, and automating contributions – all with just a few simple steps – you’ll be well on your way towards reaching financial independence!