Stay-at-Home Moms Can Have Retirement Benefits With A Spousal IRA
Married couples usually have individual careers of their own before they get married. When they were newly-weds, both of them were enjoying their personal incomes and sharing in the expenses at home, such as groceries, bills, fuel and mortgage loans. However, when the first child comes, some couples must sit down and talk about one of them giving up work to stay with their child and take care of him at home while he is very young. Giving priority to the child is often a worthwhile choice for the couple. And this is a very important decision that would change the set up of their daily lives from there on, having only one of them working for the whole family.
Either the wife or the husband must give up the jobs that both of them have grown to love through the years, all for the welfare of their child. Nothing could matter more to them. Knowing that the sacrifice would be worth it, the choice would always end up with one who has the lesser salary giving up his career to stay at home. For example, this can be the wife. She could stay and work at home if she chooses to, in order to earn some sort of income for herself and share in the expenses at home. However, she would have no 401(k) benefits and no retirement savings for now.
But the good news is, the working partner, her husband, could volunteer to pay for the contribution for an Individual Retirement Account of his spouse. This kind of contribution is called spousal IRA.
Spousal Ira could only be done when the two parties are legally married. Here, they must file a joint income tax return with the working spouse having a taxable income for the year, and the non-working spouse, if ever she has a taxable income working from home, her income must be lesser than the working spouse’s income. Getting a spousal IRA for the partner who stays at home is important, so that the one who stays at home, giving up her career for their child’s sake, will also have a sense of security later on, come retirement age.
The benefits of having an individual retirement plan or IRA is that people having that will be able to set aside some amount with compounding interest throughout the years that they could later on withdraw when they reach the age of 59 1/2. This could amount to something that would give them some sort of security or financial freedom at that age, and they would be able to do some of the things that they want to accomplish or dream about like travel or moving to another state later on.
The difference between an Ira and a 401(k) benefit is that the 401(k) benefit is salary deductible and usually, the employer shares in that contribution. However, for the Ira, the couple are the ones paying the contribution out of their salaries without any contribution from the employer. Both are tax-deferred, incurring only taxes at the time of withdrawing the money at age 59-1/2.
I would like to know in what year the spousal (stay at home wife) IRA went into effect. Also, what was/is the maximum amount that could/can be set aside each year from the beginning. I have been a stay at home wife since 1978. We had three children. I had asked my husband to set up an IRA for me years ago. He stuck out his hand and rubbed his fingers together and said, “Well, give me the money.”