What Retirement Accounts Can Be Held Jointly?

While bank accounts and many other financial accounts can be jointly owned, retirement accounts like IRAs and 401(k)s are inherently individual. That means each person must open and maintain their own retirement account. The IRS does not permit sharing these accounts between spouses or any other individuals. Spousal IRAs represent an exception that allows a working spouse to contribute on behalf of a non-working or lower-earning spouse, ensuring both can benefit from retirement savings.

If you need help creating a retirement plan, a financial advisor can walk you through specific strategies for your needs and goals.

Each of the various types of retirement accounts such as individual retirement accounts (IRAs) and 401(k)s have features that make them different. However, one thing they all have in common is that they are individual accounts. Unlike joint bank accounts, retirement accounts are strictly owned by one person.

An IRA is exactly what its name implies – individual. This means that each account is owned by one person only. The IRS does not permit IRAs to be shared between spouses or any other individuals. Each person must open and maintain their own IRA if they wish to take advantage of the tax benefits these accounts offer.

Similarly, 401(k)s and other workplace retirement plans are also individual accounts. These plans are sponsored by employers and are tied to the individual employee. While spouses can be beneficiaries of these accounts, they cannot be joint owners. Each spouse must have their own 401(k) account through their respective employers if they both want to participate in this type of retirement savings plan.

Although joint IRAs or 401(k)s do not exist, there are alternative ways for couples to save for retirement together. Spousal IRAs allow a working spouse to contribute to an IRA on behalf of a non-working or lower-earning spouse. 

This provision helps couples save for retirement even if one spouse does not have earned income. A spousal IRA operates under the same rules as traditional and Roth IRAs, providing a flexible way to boost retirement savings.

To qualify for a spousal IRA, the couple must file a joint tax return. The working spouse must have enough earned income to cover the retirement account contributions for both spouses. The non-working spouse must be under the age of 70 1⁄2 for a traditional IRA but can contribute to a Roth IRA regardless of age, as long as the couple’s adjusted gross income falls within the allowable limits for Roth contributions.

The annual contribution limit for a spousal IRA is the same as for individual IRAs. For 2024, each spouse can contribute up to $7,000, or $8,000 if they are age 50 or older. These limits apply to both traditional and Roth IRAs. 

Consider a married couple where one spouse works full-time outside the home and the other is a stay-at-home parent. The income-generating spouse earns $90,000 a year, which is enough to cover their living expenses and still allows for retirement contributions. This spouse can contribute $7,000 to their own IRA and another $7,000 to the stay-at-home spouse’s spousal IRA. If they are both over 50, they can each contribute an additional $1,000, making their total annual contribution $16,000.

When opening a spousal IRA, you’ll first need to decide between a Traditional IRA and a Roth IRA. Contributions to a Traditional IRA may be tax-deductible, while withdrawals are taxed. Roth IRA contributions are made with after-tax dollars, allowing for tax-free withdrawals in retirement. The indicated choice depends on the individual saver’s current tax situation and retirement goals.

Next, choose a financial institution to hold the IRA, such as a bank, brokerage or mutual fund company. The application process involves providing personal information and selecting the type of IRA. After the account is set up, make contributions either via lump sum or regular deposits, ensuring you do not exceed the annual contribution limits.

Naming a beneficiary for your spousal IRA is a key step in retirement planning. A beneficiary is the person who will inherit the funds in the IRA upon the account holder’s death. This ensures the smooth transfer of assets and can help avoid probate.

To name a beneficiary for a spousal IRA, complete the beneficiary designation form provided by the IRA custodian. This form typically asks for the beneficiary’s name, relationship to the account holder, and Social Security number. Review and update beneficiary designations periodically, especially after significant life events such as marriage, divorce or the birth of a child.

While a spouse is often the primary beneficiary, you may also name contingent beneficiaries. Contingent beneficiaries inherit the account if the primary beneficiary predeceases the account holder. This strategy provides a backup plan, ensuring the assets are passed on according to your wishes.

Designating a beneficiary for a spousal IRA can offer tax advantages. For example, a surviving spouse can roll over the inherited IRA into their own IRA, allowing the continued tax-deferred growth of the assets. A spouse beneficiary can also keep the spousal IRA as an inherited account and take distributions based on their own life expectancy. 

Some non-spouse beneficiaries, including minor children and someone who is disabled, can take distributions according to their own life expectancy. Then can instead elect to take distributions according to the original account owner’s remaining life expectancy. 

Although traditional joint bank accounts don’t offer tax benefits. couples can save for retirement using these accounts, which allow both partners to contribute and manage their funds. This approach may be a good fit for someone who prefers a simple approach to saving that offers easy access and control over their combined assets. Joint bank accounts can include savings and money market accounts.

Joint brokerage accounts are another option for couples planning their retirement together. These accounts enable both partners to invest in stocks, bonds, mutual funds and other securities, allowing for a diversified investment strategy. Joint brokerage accounts can also offer the opportunity for higher returns.

While individual retirement accounts (IRAs) and 401(k)s cannot be shared between spouses, the spousal IRA offers a way couples can accumulate retirement savings together. Subject to contribution limits and other rules, one partner who earns income can contribute to a tax-advantaged account for the other partner. With careful planning and regular reviews, spousal IRAs can be a strategic component of a comprehensive retirement plan.

• A financial advisor can help you create a personalized retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• SmartAsset’s retirement calculator can tell you today whether you’re saving enough for a comfortable and secure retirement, even if it’s still decades away.

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