Author Topic: Jointly owned retirement funds?  (Read 6298 times)

Melisande

  • Bristles
  • ***
  • Posts: 252
Jointly owned retirement funds?
« on: April 18, 2016, 07:09:32 AM »
OK. I already know that jointly owned retirement funds per se do not exist. However, is there any way we can open a joint investment account and get a similar tax advantage?

I am asking because, being a stay-at-home wife who is good with money (frugal, got an amazing refinance for our mortgage, found much less costly insurance, etc.,) I would feel even more motivated if much of our savings could go into a joint fund and not into accounts that are solely in my husband's name.

I do max out my Roth IRA contribution every year. But once that is done, there is no other good place for the money to go, except into my husband's retirement. He has already maxed out the matching funds and opened an non-matched retirement account to which he is contributing an additional $750/month. Still the cash is accumulating in checking and savings and needs to be invested.

We discussed the possibility of opening a joint investment account with Vanguard and he said he thought that would be a good idea. (We have a strong marriage and I get the sense that he was starting to feel a little guilty that the majority of the savings was going to him.) However, if we opened a standard brokerage account, I know that we'd start feeling the tax penalty -- the tax on capital gains. So, how do we get around this?

Bracken_Joy

  • Walrus Stache
  • *******
  • Posts: 8929
  • Location: Oregon
Re: Jointly owned retirement funds?
« Reply #1 on: April 18, 2016, 07:11:57 AM »
I am curious about this too. Posting to follow.

NoStacheOhio

  • Handlebar Stache
  • *****
  • Posts: 2140
  • Location: Cleveland
Re: Jointly owned retirement funds?
« Reply #2 on: April 18, 2016, 07:16:12 AM »
We're in a sort of similar spot. Almost all of the retirement money is in my name.

Max the individual retirement accounts first, the tax benefits are too good not to, and that's the only way to get them.

Beyond that, figure out what your state says about marital assets. Most places, income earned while married rightfully belongs to both people. This might give you a little bit more peace of mind, even if it's still technically "his" account.

Bracken_Joy

  • Walrus Stache
  • *******
  • Posts: 8929
  • Location: Oregon
Re: Jointly owned retirement funds?
« Reply #3 on: April 18, 2016, 07:21:37 AM »
We're in a sort of similar spot. Almost all of the retirement money is in my name.

Max the individual retirement accounts first, the tax benefits are too good not to, and that's the only way to get them.

Beyond that, figure out what your state says about marital assets. Most places, income earned while married rightfully belongs to both people. This might give you a little bit more peace of mind, even if it's still technically "his" account.

I didn't know that! I would love links to articles about it if you can find them? I figured since it went into his name, it was his. We have a very strong marriage, but I've had enough relatives have substance abuse or mental health crises destroy otherwise totally strong marriages that I try to be a realist about it all, before becoming a SAHM. Thank you for the input.

Rural

  • Magnum Stache
  • ******
  • Posts: 4880
Re: Jointly owned retirement funds?
« Reply #4 on: April 18, 2016, 07:24:40 AM »

 It's not a joint retirement account but one that would be in your name, but look into a spousal IRA:


https://investor.vanguard.com/ira/spousal-ira


ETA: Whoops. Missed that you have one already.
« Last Edit: April 18, 2016, 08:37:02 AM by Rural »

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4747
  • Age: 12
  • Location: UTC-10:00
Re: Jointly owned retirement funds?
« Reply #5 on: April 18, 2016, 07:26:20 AM »
We discussed the possibility of opening a joint investment account with Vanguard and he said he thought that would be a good idea. (We have a strong marriage and I get the sense that he was starting to feel a little guilty that the majority of the savings was going to him.) However, if we opened a standard brokerage account, I know that we'd start feeling the tax penalty -- the tax on capital gains. So, how do we get around this?
Using tax efficient investments will minimize the capital gains.

NoStacheOhio

  • Handlebar Stache
  • *****
  • Posts: 2140
  • Location: Cleveland
Re: Jointly owned retirement funds?
« Reply #6 on: April 18, 2016, 07:28:12 AM »
We're in a sort of similar spot. Almost all of the retirement money is in my name.

Max the individual retirement accounts first, the tax benefits are too good not to, and that's the only way to get them.

Beyond that, figure out what your state says about marital assets. Most places, income earned while married rightfully belongs to both people. This might give you a little bit more peace of mind, even if it's still technically "his" account.

I didn't know that! I would love links to articles about it if you can find them? I figured since it went into his name, it was his. We have a very strong marriage, but I've had enough relatives have substance abuse or mental health crises destroy otherwise totally strong marriages that I try to be a realist about it all, before becoming a SAHM. Thank you for the input.

Apparently Oregon is weird, but I think in this instance retirement accounts would still be considered marital assets.

https://www.hg.org/article.asp?id=18643

I just did a quick Google, so you may need to do a bit more digging.

Heckler

  • Handlebar Stache
  • *****
  • Posts: 1346
Re: Jointly owned retirement funds?
« Reply #7 on: April 18, 2016, 08:10:43 AM »
Canada has a spousal RSP account, where the high income earner contributes in the spouses name, and gets a tax rebate at current high rates. In the future, the low income spouse claims the income from the RSP as thier own, at a likely much lower tax rate. 

http://www.finiki.org/wiki/Registered_Retirement_Savings_Plan

See Spousal section for more if you also plan to move up post-Trump.
« Last Edit: April 18, 2016, 08:22:11 AM by Heckler »

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 7112
Re: Jointly owned retirement funds?
« Reply #8 on: April 18, 2016, 08:15:37 AM »
However, if we opened a standard brokerage account, I know that we'd start feeling the tax penalty -- the tax on capital gains. So, how do we get around this?

You only pay capital gains taxes when you sell something and the "pain" isn't that bad. You will pay tax on dividends you earn each year, but really that's not a big deal. If you have maxed your tax prefered accounts who cares? It just means you are saving well.

FWIW - I'm from Canada so I am not commenting on what tax prefered account options you may or may not have.

I would see a lawyer about your personal financial situation with regards to your hubby's retirement accounts. Everyone has a strong marriage until they don't. A lawyer [unlike google] can provide some personally tailored advice and should you need more protection than is available automatically in your jurisdiction a lawyer can advise you what steps to take. Get your legal/financial bearings and then you can relax and not worry about it.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5169
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: Jointly owned retirement funds?
« Reply #9 on: April 18, 2016, 08:19:16 AM »
I'm not aware of any tax-advantaged joint retirement account in the US. There is the spousal IRA, which it sounds like you're doing already.

Beyond that, taxable accounts needn't result in large amounts of tax, provided that you buy and hold and Congress leaves the 0% capital gains rate in place for the lower tax brackets.

Even so, the retirement accounts will likely result in even lower tax.

Melisande

  • Bristles
  • ***
  • Posts: 252
Re: Jointly owned retirement funds?
« Reply #10 on: April 18, 2016, 09:02:43 AM »
Thanks for all the responses and suggestions. I am still mentally processing ....

That said,

However, if we opened a standard brokerage account, I know that we'd start feeling the tax penalty -- the tax on capital gains. So, how do we get around this?

You only pay capital gains taxes when you sell something and the "pain" isn't that bad. You will pay tax on dividends you earn each year, but really that's not a big deal. If you have maxed your tax prefered accounts who cares? It just means you are saving well.

FWIW - I'm from Canada so I am not commenting on what tax prefered account options you may or may not have.

I would see a lawyer about your personal financial situation with regards to your hubby's retirement accounts. Everyone has a strong marriage until they don't. A lawyer [unlike google] can provide some personally tailored advice and should you need more protection than is available automatically in your jurisdiction a lawyer can advise you what steps to take. Get your legal/financial bearings and then you can relax and not worry about it.

I still have so much to learn about investing, but I learned something by accident this year. I was fortunate enough to receive a totally unexpected small inheritance from a distant relative ($5,000) and for the first time ever (I think) could make my own non-retirement investments. So, I set up a brokerage account at Vanguard, chose an enticing high risk fund and plopped the $5,000 in. Well, maybe the fund wasn't the greatest or maybe it's because the market has been weak over the past year, but when I did my taxes, the account stood at $4,800 :-(. OK, them's the break. Besides I won't be selling for at least 10 years or so, so maybe it will perk back up. However, I was surprised to learn that although the account was lower, I had somehow "earned" $345 in capital gains that were indeed taxable this year. For a variety a reasons, it turned out that we owed a small amount on our taxes this year instead of getting a refund ... and this just added to the pain.

Granted that I still don't fully understand the situation, but I don't want to see something similar happen to a jointly owned non-retirement fund.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5169
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: Jointly owned retirement funds?
« Reply #11 on: April 18, 2016, 09:07:15 AM »
So, I set up a brokerage account at Vanguard, chose an enticing high risk fund and plopped the $5,000 in. Well, maybe the fund wasn't the greatest or maybe it's because the market has been weak over the past year, but when I did my taxes, the account stood at $4,800 :-(. OK, them's the break. Besides I won't be selling for at least 10 years or so, so maybe it will perk back up. However, I was surprised to learn that although the account was lower, I had somehow "earned" $345 in capital gains that were indeed taxable this year.

This can happen in mutual funds that make sales within the fund. If they sell shares for a gain, they have the pass that gain on to you so that you pay tax on it.

Most of Vanguard's index funds rarely sell shares, so this may not have been a problem if you had chosen a less "risky" fund.

Jack

  • Magnum Stache
  • ******
  • Posts: 4734
  • Location: Atlanta, GA
Re: Jointly owned retirement funds?
« Reply #12 on: April 18, 2016, 10:28:15 AM »
If you're already maxing your spousal IRA, the only other tax-advantaged thing you'll be able to do is get a job (or self-employment) that will let you earn income and contribute to a 401k.

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 1969
Re: Jointly owned retirement funds?
« Reply #13 on: April 18, 2016, 10:42:01 AM »
To give an example of Vanguard Total Stock market held in taxable:
With $10,000 and a 2% dividend, the fund dividends $200 each year.
Since you hold it long enough (2 months) for it to be a qualified dividend, the tax rate is less.
Assuming the median tax rate of 25%, qualified dividends are taxed at 15% ($200 x 15% = $30) 

On assets of $10,000 you would be paying $30 in tax owing to the $200 qualified dividend, assuming a 25% tax bracket (15% for qualified dividends).  Holding a joint taxable account might involve less tax than you expect.