How To Set Up a Spousal IRA

Shopping Tips don't only concern shopping for physical goods like apprel, electronics, furniture, auto etc., but includes shopping for financial goods. As you know from the news, there has been a lot of whoop lah about setting up private accounts. One way of insuring your spouse's security is setting up a spousal IRA, here is the how-to guide, thanks Harmon and Jenny.

How To How to Set Up a Spousal IRA
From Harmon and Jenny McKinney,
Your Guide to Retirement Planning.

If you are employed and have a non-working spouse or one who has little or no income, you might be allowed to set up and contribute to an IRA for that spouse. Here is how you set up a spousal IRA.

Difficulty: Average

Time Required: 2 hours
Here's How:

1. Be sure you and your spouse meet the eligibility requirements.

2. Be sure you do not exceed the compensation limits.

3. Be sure you or your spouse do not exceed the age limit for a traditional IRA.

4. Review the contribution limits. Make sure you take advantage of the catch-up limit if you and your spouse are over 50.

5. Make sure to open the IRA in your spouse's name only with you as the beneficiary. You must also use your spouses social secuity number on the IRA.
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6. To take advantage of a tax deduction for the 2004 tax year, a spousal IRA must be opened and a contribution made before April 15, 2005.

7. Remember, only contributions to a traditional IRA are tax deductible up to the maximum contribution limits.
Tips:

1. Eligibility Requirements
You must be legally married at the end of the tax year and file a joint income tax return. You must also be employed and have an earned income of at least the amount you contribute to the IRA. If you plan to open a traditional IRA, he or she must be under the age of 70 1/2. If you plan to open a Roth IRA, there are no age limits.

2. Compensation Limits
For a traditional IRA, there is no limit on the amount you earn in order to contribute to a spousal IRA. For a Roth IRA, your earnings cannot be more than $160,000 to contribute to a spousal IRA.

3. Contribution Limits
For 2004, you can contribute 100% of your compensation or $3000, whichever is less to a spousal IRA. For years 2005, 2006 and 2007, you can contribute the lesser of your earnings or $4000. For 2008, you can contribute the lesser of your earnings or $5000 to a spousal IRA. If your spouse is 50 years old or over, you can contribute an additional $500 for years 2004 and 2005 and an additional $1000 for years 2006 through 2008.

4. Deduction Limits
If you aren't covered by a retirement plan where you work, you will be able to deduct the full amount of your spousal traditional IRA from your income tax return. If you are covered by a retirement plan, your spousal IRA is fully deductible if your AGI is less than $150,000 and partially deductible if between $150,000 and $160,000.

5. Individual or Joint Account
A spousal IRA must be in your spouse's name. Joint accounts are not allowed even though you are making the contribution. You can be the beneficiary of the spousal account but it must be established in your spouses name only.

What You Need:

* A legal spouse
* An earned income
* A joint income tax return
* Earnings of less than $160,000
* Age of less than 70 1/2 for a traditional IRA