April 07, 2022
We all know that through the pandemic many women made the hard choice to quit jobs and focus on the hard work of supporting their kids at home, and often simultaneously their parents.
I want to make sure that any married woman who didn't have earned income in 2021 is aware she can still contribute to an Individual Retirement Account (IRA) for the 2021 tax year.
The standard rule for contributing to an IRA is that you must have earned income for that year. For instance, if you want to contribute $6,000 to an IRA, your federal tax return would need to show that you earned at least $6,000.
But there's a special IRA rule for spouses. Even if you don't have earned income you can contribute to an IRA as long as your spouse meets the earned-income test.
That's extra retirement savings you and your spouse can—and should—take advantage of. This year, anyone under age 50 can contribute as much as $6,000. The limit is $7,000 for people at least 50 years old.
You can still make a contribution for the 2021 tax year up through the filing deadline of April 18, 2022.
And after that you can focus on your 2022 tax year IRA contributions. If you file a joint tax return with modified gross income below $204,000 you can both contribute to a Roth IRA, which I think is a better long-term choice than a traditional IRA.
Now, that said, if a spouse has a Roth 401k at work, and the plan offers low-cost index mutual funds and a company match, I am fine if you do all your saving in that account. But for everyone else I think you will benefit from adding Roth IRAs to your retirement saving strategy.
Here's a decision tree to consider: