For couples, retirement planning is almost always considered to be a joint endeavor. Just as various other aspects of financial planning besides retirement are handled with both parties in mind; many will assume that the same will be true in every regard for their retirement plans.
But in the context of self-directed IRAs (or any IRA, for that matter) the rules are somewhat different. This is because IRAs are by their very nature individual accounts. While there are certainly provisions that let you pass on your IRA to a spouse after you are gone, there’s simply no such thing as a “joint” IRA.
Given that there’s no possibility for a couple to co-own or co-invest in a single joint self-directed IRA, let’s look at some of the issues and questions that can help people reach their joint retirement goals using the IRA structure.
Each Spouse Can Have Their Own Account. Every individual is eligible to open one or more IRAs for themselves, provided they have the earned income available to make contributions every year. For a married couple, this means that they have the opportunity to contribute up to $11,000 or more ($5,500 each if below age 50, $6,500 if age 50 or over) to tax-advantaged IRAs. These contributions may tax deductible, and are in addition to any other retirement or savings accounts that they may have.
Each Spouse Needs Earned Income. It’s important to note that while an individual must have earned income in order to make a contribution to an IRA, a couple who files their taxes jointly can meet this requirement for the two of them based on just the earnings of one of them. This means that as long as one of the couple has an earned income to cover the annual contributions of both of them to their own accounts, they’ve satisfied this rule.
The upshot is that even if one spouse is not employed, he or she may be able to contribute to their own account based on the couple’s joint income, and the couple will benefit financially.
Stagger Your Retirements. Another technique for maximizing your retirement savings as a couple is to stagger the time that each of you choose to enter retirement. Consider how each spouse’s IRA has been set up (e.g., Roth versus traditional structure), the balance in each account, each spouse’s expected monthly Social Security benefits at various retirement ages, and their current work status. In many cases, it can be financially beneficial for one spouse to retire first, begin taking their Social Security benefits in order to support the couple, while the other spouse continues working and deferring collection of Social Security benefits (which will lead to a greater monthly benefit once that spouse does enter retirement).