Contributions to individual retirement accounts (IRAs) must come from earned income — wages, salary, self-employment income, etcetera. But a spouse with little to no income is allowed to open and contribute to an IRA with help from the other spouse.
In the tax world, a spousal IRA is known as the Kay Bailey Hutchison Spousal IRA. This IRA allows each member of a couple to save for retirement in their own separate retirement accounts even though one spouse has little to no income. The spouse with the earned income can contribute to both their own and the spousal IRA.
This is not a joint account. There is no such thing as a joint retirement account. You open an IRA in the name of the spouse with little/no earnings. To open a spousal IRA, you must be married and you must file a joint tax return.
You can choose either the traditional or Roth version of IRA or one of each. The spousal IRA tax advantages are roughly the same as any other IRA.
The spousal IRA has the same contribution limit as the spouse with the earned income: up to $5,500 a year ($6,500 if age 50 or older). You must have enough combined earned income to justify both IRA contributions. A couple younger than age 50, for example, must have at least $11,000 in earned income to justify an $11,000 ($5,500 x 2) combined annual contribution to both IRAs. If one spouse is under 50 and the other over 50, it would be $5,500 and $6,500 a year — $12,000. If both are over age 50, it’s $13,000 a year ($6,500 x 2).
The ability to deduct traditional IRA contributions can get a bit complicated under normal circumstances. The spousal IRA contribution deduction can be a little trickier. The spousal IRA deduction is affected by contributions to employer retirement plans and the contributions and deductions made by the spouse with the greater income.
Required minimum distributions (RMDs) are no different for the spousal IRA. Roth IRAs do not require RMDs at any age; whereas traditional IRAs have RMDs after turning age 70½.
For more details, read IRS publications 590-A and 590-B. Rules for spousal IRAs are in Publication 590-A.