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ROTH IRA: Fully Fund spouse or open my own?

Posted: Wed Jan 30, 2013 1:56 pm
by nuvodido
My husband has had a ROTH IRA for a long time, but we have never fully funded it. Now that we have a little extra money, he wants me to open my own. My gut feeling is to fully fund his and open mine if we have left over money at the end of the year. Am I wrong. Should I open my own ROTH IRA?

Re: ROTH IRA: Fully Fund spouse or open my own?

Posted: Wed Jan 30, 2013 3:57 pm
by linuxuser
You should fully fund both. But if you are not able to fund both, if you fund his, if he is older, than you all will be able to access that money sooner.

Re: ROTH IRA: Fully Fund spouse or open my own?

Posted: Wed Jan 30, 2013 5:15 pm
by MN Finance
Agree you should fund both if you can. If not and you fund his, then that's attractive because you have less accounts to deal with and it makes buying/selling funds easier if everything is in one place (more attractive for ex to have a $50k Roth instead of a $45k Roth and a $5K Roth). If there's an age gap, like you're 10 years older, then as mentioned, you might opt to fund yours so you can access yours at 59.5 should you need/want to. Otherwise I don't think there's any difference at all

Re: ROTH IRA: Fully Fund spouse or open my own?

Posted: Wed Jan 30, 2013 5:22 pm
by guitarguy
My wife and I chose to just full fund mine. Keeps things simpler with less accounts to manage.

Hoping to soon be able to fund hers also, even if it's not maxed, at least we want to get it started.

Re: ROTH IRA: Fully Fund spouse or open my own?

Posted: Wed Jan 30, 2013 6:24 pm
by Alan S.
The sooner you start a Roth, the sooner the 5 year clock starts to run. That's a benefit in a few cases, but not all. There is no min dollar amount to start the clock, but you should try to avoid small account fees if you can.

Re: ROTH IRA: Fully Fund spouse or open my own?

Posted: Wed Jan 30, 2013 8:41 pm
by Calm Man
Fund your's. Why should he have one and not you? If problems develop, better to at least have something in your name.

Re: ROTH IRA: Fully Fund spouse or open my own?

Posted: Wed Jan 30, 2013 9:06 pm
by guitarguy
Alan S. wrote:The sooner you start a Roth, the sooner the 5 year clock starts to run. That's a benefit in a few cases, but not all. There is no min dollar amount to start the clock, but you should try to avoid small account fees if you can.
What is the 5-year clock exactly??

Re: ROTH IRA: Fully Fund spouse or open my own?

Posted: Wed Jan 30, 2013 10:51 pm
by Duckie
guitarguy wrote:What is the 5-year clock exactly??
The Five Year Rule With Roth IRA Withdrawls
IRS Publication 590

Re: ROTH IRA: Fully Fund spouse or open my own?

Posted: Thu Jan 31, 2013 12:52 pm
by MathWizard
Open your own.

My wife and I put equal amounts in each of ours, even when we cannot fully fund them.

Re: ROTH IRA: Fully Fund spouse or open my own?

Posted: Thu Jan 31, 2013 1:01 pm
by Jordana
My husband only has a Roth and I have numerous accounts. He is 10 years older and we do fund his Roth first through back door or conversion. He also will start getting a SEP from working for my business and I will convert that the same year. I think I give him the SEP, convert the SEP, then fund the tIRA and then convert that. I will check before the time comes. I like it that there is one of us that only has a Roth and that we will not have to worry about RMDs.

Re: ROTH IRA: Fully Fund spouse or open my own?

Posted: Fri Feb 01, 2013 2:41 pm
by nuvodido
My husband is 8 years older. I did not concider that as part of our funding plans. The 5 year rule is also news to me. I will not change my mind and see about fully funding his before opening one of my own. Thank you all.

Re: ROTH IRA: Fully Fund spouse or open my own?

Posted: Fri Feb 01, 2013 4:59 pm
by FinancialDave
It may become all too clear to you when it is too late, but having somewhat equal funds between Roth and non-Roth accounts can turn out to be a real benefit to you once you are in retirement and looking at ways to lower your tax rate, so you can pull that non-Roth money at a very low tax rate.

Another reason why you need to fund BOTH Roth accounts - to get closer to 50/50 split.

fd

Re: ROTH IRA: Fully Fund spouse or open my own?

Posted: Fri Feb 01, 2013 5:17 pm
by Alan S.
For those of you with your spouse owning the only Roth IRA, note that if you inherit it directly (not through the estate), you are treated as if you owned it all along. That means that as long as your spouse held the Roth at least 5 years, all your distributions are fully qualified and tax free. You would simply roll it over to your own Roth IRA. If not held for 5 years, the holding period continues to run until you reach the 5 years in total for both spouse's holding periods.

The only issues occur if there is a divorce and one spouse is left without a Roth as part of the settlement. If the spouse without a Roth is awarded part of the other spouse's Roth in a "transfer incident to divorce", the receiving spouse who has not had a prior Roth of their own would probably have to start a new 5 year holding period, since there are no IRS Regs that establish that the transferee is to be credited with the prior holding period of the transferor.