Did you know that you can contribute to an IRA, even if you don’t work? That’s right, if you have a spouse that has earned income, you can make a Spousal IRA contribution. So, you can still save for retirement, in your name, as a spousal contribution with earned income in the household. However, actually being able to depends, because there are certain things you have to be aware of: there’s income limits as to whether or not it’s deductible, there’s also income limits if you’re wanting to do a Spousal Roth IRA. One of the things you may want to consider when making this contribution or looking at whether or not it makes sense for you is how it impacts your taxes today.
Unlike most other things that we do when we’re doing tax planning (that have to be done in the calendar year of those taxes) you can make a prior year IRA contribution all the way up until April 15th. Another thing to keep in mind is if you took money from your retirement accounts during COVID (in the year of 2020), as part of the CARES Act you have three years to return or pay yourself back those distributions. So, you can end up going above the normal contribution limits on paying yourself back those distributions, you just need to make sure that they’re coded properly – as a payback from the CARES Act. Again, work with your accountant or your CPA on this.
We’re getting very close to the tax deadline, so the decision to do a prior year contribution is running short! You have until April 15th, but if your CPA is working on your taxes now and this may be something you’re interested in, I would definitely reach out to them and have that conversation to find out whether or not it is something that you can do this year, and if it makes sense. If you have additional questions or this is something you’re not really familiar with and want to learn more about, we’d be happy to talk with you