You can fund a spouse's IRA even if he or she had no earned income in the prior year, and take the deduction this year; less tax and more savings. Image: William Potter/Shutterstock.com
By: John GrobeOne of the rules around Individual Retirement Arrangements (IRAs) is that one must have earned income to contribute to an IRA and that the contribution cannot exceed the amount of income one has earned, even if that level of income is below the annual contribution. For example, If I had $5,000 of earned income in 2024, I can’t contribute more than that amount to an IRA, even though the 2024 contribution limit is $7,000 (plus another $1,000 if over 50).
Some readers may have noticed that I used the present tense “is” when referring to last year’s limit. Why didn’t I say “was”? Because you can still contribute to a 2024 IRA even though you are reading this article in 2025. Prior year IRA contributions can be made up until the due date of federal income tax returns (usually April 15, but occasionally a few days later). So, you didn’t miss out on the opportunity to fund a 2024 IRA. If you choose to make a 2024 contribution in 2025, make sure that the IRA custodian is aware that the contribution is intended to be a prior year contribution.
BTW, the 2025 IRA contribution limits are unchanged from 2024. (Under 50 years old: You can contribute $7,000. 50 and older: You can contribute $8,000.)
So, if my spouse doesn’t work and has no earned income, does that mean that she can’t contribute to an IRA? Yes, she can’t. But, as long as I have enough earned income, and we file a joint tax return, I can contribute to one for her. This is called a spousal IRA.
Think of the advantages of funding a spousal IRA! First, we will set more money aside for our future retirement. Second, if we’re contributing to a traditional IRA and our income is below the deduction cut-off, we will be able to deduct the contribution from our federal income tax. We get a twofer – less taxes and more retirement savings.
Of course, you can make a contribution to a Roth IRA for your spouse as long as your income is below the contribution cut-off limits. In 2024 if you are filing a joint return, you can fully contribute to a Roth if your modified adjusted gross income (MAGI) is below $230,000. The contribution phases out so that at a MAGI of $240,000 you cannot contribute at all.
Now – a word about RMDs. RMDs are required minimum distributions which must be taken from traditional retirement accounts (e.g., IRAs, TSP, 401(k)s, etc.) beginning at age 73 (changing to 75 in 2033). Unless it is your first RMD, you must take it be December 31st (first RMDs can be delayed to April 1st of the following year). If you are of a certain age, you should begin thinking about your 2025 RMD now.
There are differences between RMDs taken from the TSP and those taken from IRAs. The ages in the above paragraph apply to IRAs, but, if you’re still working at your federal job at 73 (changing to 75 in 2033) you don’t have to take an RMD from your TSP until after you retire.
If you have multiple IRAs, you can aggregate the total RMD from all IRAs and take it all from just one of your IRAs. If you have multiple employer sponsored retirement plans (e.g., TSP, 401(k) from prior employer, etc.), you must take an RMD from each one separately.
Roth IRAs and the Roth TSP do not have RMDs.
John Grobe, President of Federal Career Experts, is an expert in the area of federal employee retirement and benefits. This expertise comes from his 26 year federal career in which he managed the retirement program in a 3,500-employee office of a large federal agency.
More Than a Third of Those Eligible under GPO-WEP Repeal Getting Back Payments, Says SSA
Retention Standing, ‘Bump and Retreat’ and More: Report Outlines RIF Process
House Budget Plan May Put Federal Employee Benefits on Table for Cuts
Budget Options Document Targets Retirement, Health Insurance, Other Benefits
Deferred and Postponed Annuities Under CSRS and FERS
Get Your Official Personnel Folder in Order to Max Out Benefits
