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Spousal IRA/Roth IRA question – not been in this particular situation before

Home Retirement Accounts Spousal IRA/Roth IRA question – not been in this particular situation before

  • Avatar Roentgen 
    Participant
    Status: Physician
    Posts: 73
    Joined: 03/02/2018

    Fact pattern:

    Me and wife, MFJ on taxes.

    This year, per the usual, I will have too much earned income to contribute directly to a Roth.  Spouse will have NO earned income.

    I make the maximal 2019 IRA contributions for me and her this week, each into our respective traditional IRA accounts.

    Question #1:  In her case, this is legit, right, even without her having “earned” income,” because my deposit of money will be deemed a “spousal IRA contribution?”  This is a legitimate deposit of cash into her IRA, isn’t it?

    Question #2:  Can her contribution go directly into a Roth, given that she as an individual will make nothing this year, and IRAs are “individual” retirement accounts, not pooled with the spouses assets/income?

    Sorry if this is a dumb question . . . in prior years she had income and she would do a traditional IRA.  Thank you for allowing me to tap into the wisdom of the WCI crowd.  Much appreciated.

    #177748 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2806
    Joined: 01/03/2017

    If your MFJ income is over the threshold, it doesn’t matter who earns it. For both of you, you need to do the backdoor.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #177754 Reply
    Liked by Roentgen, jacoavlu
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4405
    Joined: 01/08/2016

    She has existing IRAs?
    Stop and read the tutorial.

    #177792 Reply
    Liked by Roentgen
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8113
    Joined: 01/09/2016
    1. Yes
    2. Yes
    3. (Question you didn’t ask: Will we pay pro-rata taxes on her backdoor conversion given that she has an IRA from prior years?) Yes

    See The Pro-Rata Rule for Backdoor Roth IRAs

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #177814 Reply
    Liked by Roentgen
    DMFA DMFA 
    Moderator
    Status: Physician
    Posts: 2136
    Joined: 06/24/2016

    Fact pattern:

    Me and wife, MFJ on taxes.

    This year, per the usual, I will have too much earned income to contribute directly to a Roth.  Spouse will have NO earned income.

    I make the maximal 2019 IRA contributions for me and her this week, each into our respective traditional IRA accounts.

    Question #1:  In her case, this is legit, right, even without her having “earned” income,” because my deposit of money will be deemed a “spousal IRA contribution?”  This is a legitimate deposit of cash into her IRA, isn’t it?

    Question #2:  Can her contribution go directly into a Roth, given that she as an individual will make nothing this year, and IRAs are “individual” retirement accounts, not pooled with the spouses assets/income?

    Sorry if this is a dumb question . . . in prior years she had income and she would do a traditional IRA.  Thank you for allowing me to tap into the wisdom of the WCI crowd.  Much appreciated.

    Click to expand…

    1. Yep

    2. No.  The only thing that is “joint” about *Individual* Retirement Arrangements is the income when one files jointly.

    If you want to do Backdoor Roth for her, you’ll either need to pay tax on her current Traditional IRA money on conversion, or find a pretax qualified plan into which to rollover.

    "I like money." - Frito Pendejo (Idiocracy)

    [Not a financial professional (yet), lawyer, or employee of The White Coat Investor]

    #177861 Reply
    Liked by Roentgen
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1903
    Joined: 02/01/2016

    She has existing IRAs?
    Stop and read the tutorial.

    Click to expand…

    Also, I hope her previous traditional IRA contributions were before you were married or before your income prevented your from making direct Roth contributions.

    if your MFJ MAGI was to high for you to do direct contributions. It was also too high for her to do traditional IRA contributions even if she was not an active participant in an employer retirement plan.

    If the previous sentence is true you have a serious problem on your hands, please reply with details on years.

    #178041 Reply

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