Spousal IRAs

Spousal IRAs is an IRA funded for a spouse with little or no income by a spouse with at least $2,000 in income.

This is an IRA funded for a spouse with little or no income by a spouse with at least $2,000 in income. Their combined income must be at least equal to the amount contributed. They must file a joint tax return for the year the deduction is taken. A Roth IRA may also be used for the spousal IRA, but there is an income limit to deal with. Eligibility is phased out once joint AGI is between $150,000 and $160,000. If you are a spouse who is at home taking care of children or an elder relative, you may want to consider a spousal IRA for those years you are out of the job market.

Nondeductible IRAs

If you don't qualify for any or the other IRAs due to income limitations, you can always plunk down $2,000 for a nondeductible IRA.

If you don't qualify for any or the other IRAs due to income limitations, you can always plunk down $2,000 for a nondeductible IRA. It behaves like the other IRAs in this section; the earnings compound tax deferred, and when money is withdrawn from the account, only the earnings are taxed as ordinary income because the contributions were made with after-tax dollars. Penalty free withdrawals before age 59 1/2 are allowed if the money is used for first-time home purchases or for higher-education expenses.

Nondeductible IRAs should be used when your are looking to create more tax-deferred investing for your retirement portfolio or you are hoping to convert your IRAs eventually to Roth IRAs.