Spousal IRA

• A spousal IRA is the same as a traditional IRA except that it is funded by a working spouse on behalf of the non-working spouse. To make this work, the working spouse has to make enough money to fund both his and his spouse's IRA. IRA contributions in a given year cannot exceed the account holder's earned income for that year. For example, in 2011, the maximum amount of money you can contribute to an IRA is $5,000 per year, or $6,000 per year if you are age 50 or older. This means that the spouse has to make at least $10,000, or $12,000, per year to fund both accounts.
  
  

Income Limits

• Before a spousal IRA can be used, the couple must meet eligibility guidelines. The couple has to file an income tax return jointly. The couple's income also must fit within a certain range. For instance, in 2011, the couple's income must be below $167,000 per year if the working spouse is eligible for a qualified retirement plan at work or through self-employment. If the income is between $167,000 and $177,000 per year, the couple can make a partial contribution. The income limits for the traditional IRA determine how much of your contribution can be deducted from your taxes. With Roth IRAs, the income limits determine how much you can contribute.
  
  

Roth IRA

• With a traditional IRA, the working spouse will make pretax contributions to the account of the non-working spouse. When the spouse reaches retirement, she can withdraw the money, but will have to pay taxes on it. With the Roth IRA, the working spouse can contribute to the account with after-tax contributions. When the account holder reaches retirement age, she can take money out without having to pay taxes on the amount of the distribution. If money is taken out of the traditional IRA before the age of 59 1/2, a 10 percent penalty and income taxes will be charged on the entire amount withdrawn. With a Roth IRA, if she takes money out before age 59 1/2, she will pay a 10 percent penalty and taxes only on the earnings from the investments in the account that are withdrawn.
  
  

Contribution Requirement

• Although the income of the working spouse is required to qualify the non-working spouse for an IRA, the money contributed to the account does not necessarily have to come from the working spouse. The non-working spouse can come up with the money through some other means and contribute it to the account. The source of the money is not important to the Internal Revenue Service as long as the working spouse makes enough money to qualify for the account.