How To Save For Retirement When One Of You Isn’t Working — The Spousal IRA

Take these two medical spouse’s situations.

  • Medical Spouse A: Their DrSpouse is in medical school. They are working to put them through medical school.
  • Medical Spouse B: They stay home to care for the family. Their DrSpouse is working.

Are any of these you?

If so, it means probably only one of you has access to a retirement account through work, which makes retirement harder to save for.

But does it mean only the working spouse can save for retirement??

Not at all!!

Just because your family receives only one paycheck does NOT mean there can’t be his and her retirement accounts.

Let me explain your options.

Have You Heard Of The Spousal IRA?

When you marry, your finances are combined. And the government recognizes that. To help reach your goals together even when one of you isn’t working, our government gives you access to not only one IRA bucket, but two!

A spousal IRA is that second bucket.

A spousal IRA allows non-working spouses to have an IRA without that person having “earned income,” as in a traditional paying job.

How Does A Spousal IRA Work?

As long as the working spouse earned income, that person can make contributions to spousal IRAs. Total contributions to both IRAs can’t exceed earned income, though.

(You need to file taxes jointly to contribute to a spousal IRA. So if you are filing taxes separately to save on student loan payments, see a tax professional because it’s more complicated than I can explain in this post.)

Contribution limits for 2020 is $6000 a year for each IRA. So for his and her IRAs, that’s $12,000 per year.

Don’t Get Confused:

A spousal IRA is NOT a special IRA ❌ (It’s either a Traditional or Roth IRA.)

A spousal IRA is NOT a joint account ❌ (It’s in the non-working spouse’s name and belongs to that person.)

It does NOT mean that you each get a Roth IRA and a spousal Roth IRA. ❌ (Each of you gets to pick one.)

In Summary

If you (as the non-physician spouse) don’t receive any paychecks, your DrSpouse CAN contribute to your spousal IRA. Or if you’re working to put your DrSpouse through medical school, you CAN contribute to their spousal IRA.

As long as ONE person in your household brings home a paycheck and you file a joint tax return, you can contribute to his and her IRAs 👍🏻

Be sure to take advantage of the spousal IRA for whoever isn’t earning income. And contribute as early and often as possible so you can reach early FI or fast FIRE (financial independence / retire early). Saving for retirement during medical school and residency is NOT too early. Starting NOW will have a tremendous compounding effect that will set you up for financial stability.

I’m a hugger. I’m hugging and supporting you, friend ❤️

To your strong medical family,