The Money Mustache Community

Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: YTProphet on March 10, 2015, 11:49:04 AM

Title: Stay-at-home spouse - IRA or Roth IRA?
Post by: YTProphet on March 10, 2015, 11:49:04 AM
DW is a SAHM so she doesn't have access to a 401k plan. I max out mine as well as my Roth IRA. Should I have her max out a traditional IRA instead of a Roth in order to further decrease our tax liability? Or should I just bite the bullet now while I can take advantage?

Gross income is around $125k, but with deductions and what-not is around $70k.
Title: Re: Stay-at-home spouse - IRA or Roth IRA?
Post by: terran on March 10, 2015, 12:14:33 PM
Not a full answer, but there's no technical difference between your IRA and your wife's IRA, so if you've decided a roth is the way to go for you then there's no reason it shouldn't be to you and vice versa.

The fact that you are covered by a retirement plan at work means your wife is too: http://www.irs.gov/Retirement-Plans/Are-You-Covered-by-an-Employer's-Retirement-Plan%3F

In your case you're probably close to or above the AGI limit on contributing to a traditional IRA: http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/2014-IRA-Contribution-and-Deduction-Limits-Effect-of-Modified-AGI-on-Deductible-Contributions-If-You-ARE-Covered-by-a-Retirement-Plan-at-Work
Title: Re: Stay-at-home spouse - IRA or Roth IRA?
Post by: MDM on March 10, 2015, 02:51:38 PM
Not a full answer, but there's no technical difference between your IRA and your wife's IRA, so if you've decided a roth is the way to go for you then there's no reason it shouldn't be to you and vice versa.

The fact that you are covered by a retirement plan at work means your wife is too: http://www.irs.gov/Retirement-Plans/Are-You-Covered-by-an-Employer's-Retirement-Plan%3F

In your case you're probably close to or above the AGI limit on contributing to a traditional IRA: http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/2014-IRA-Contribution-and-Deduction-Limits-Effect-of-Modified-AGI-on-Deductible-Contributions-If-You-ARE-Covered-by-a-Retirement-Plan-at-Work

That's not quite true.  See http://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-if-You-Are-NOT-Covered-by-a-Retirement-Plan-at-Work:
Quote
If Your Filing Status Is...married filing jointly with a spouse who is covered by a plan at work
And Your Modified AGI Is...$183,000 or less
Then You Can Take...a full deduction up to the amount of your contribution limit.

Note that in the "Are You Covered by an Employer's Retirement Plan?" document, money has to go into an account in the wife's (using OP's situation) name for the answer to be "yes".  Otherwise she is not covered.