IRA Options for my spouse

[techinvestor23]

Hi All,

My wife doesn't work currently. Few years ago when my income was under the limit, I had invested approximately 11K in a spousal IRA. This includes 1K of non-deductible IRA.

I have already maxed out my 401K for last year. Our income is over the income limits for deduction. I would like to contribute more on a IRA that she can control. Is there an option to do ROTH IRA in her name ? Should I add more as a non-deductible IRA ?

Thanks. Please let me know if more information is required.

[mhalley]

As she doesn’t work, the only option would be to do the backdoor Roth which would require converting the trad ira to Roth and paying taxes. A non deductible ira is generally not worth the future tax hassle.

[techinvestor23]

Thanks for your response. I don't want to convert the traditional IRA to Roth now as the taxes would be higher. I will just invest in a taxable account then.

[lakpr]

Thanks for your response. I don't want to convert the traditional IRA to Roth now as the taxes would be higher. I will just invest in a taxable account then.

Reconsider. Once 2026 rolls around, you may end up paying even more taxes on this money. Even assuming that $11k doubled in value, at 24% tax rate you will incur $5.5k in taxes. The advantage of Roth over taxable account is approximately $1000 per year, assuming long (20 years or more) investment horizon. You will break even in approximately 5 years, perhaps less.

Link to the post on how I arrived at that $1000 figure, here:
viewtopic.php?p=5801342#p5801342

[retiredjg]

Are you aware that she has a different limit for deductions than you have?

Did you file form 8606 for the non-deductible contribution a few years ago?

I don't see any point in making more non-deductible contributions if they are not going to be converted to Roth IRA (backdoor Roth process). However, it appears she has some traditional IRA from deductible contributions as well. That makes the backdoor process less desirable (unless you can convert it all to Roth).

[techinvestor23]

Thank you.

Are you aware that she has a different limit for deductions than you have?

No, Can you please help explain this more ?

Did you file form 8606 for the non-deductible contribution a few years ago?

I think I did this in the year I contributed. I filed using Turbotax, I will look it up.

[retiredjg]

Thank you.

Are you aware that she has a different limit for deductions than you have?

No, Can you please help explain this more ?

Look at these two charts. One if for you - a person who is covered by a retirement plan at work. The other is for your spouse who is not covered by a plan at work. You will see that the limits for taking a deduction in tIRA are different.

So she may or may not be able to deduct. Ant that may or may not be the best choice (not enough information).

https://www.irs.gov/retirement-plans/20 ... an-at-work


https://www.irs.gov/retirement-plans/20 ... an-at-work

These are tables for 2023...not 2022.

[Rob Relyea]

Going through Prioritizing Investments wiki may be helpful.

I've also built a tool (bogle.tools/saving) that walks you through the Priorizing Investments 10 steps (and it asks for incomes of both people, and adjusted gross income and then helps recommend what kind of IRA/Roth you each should get...and if there might be other investment priorities before that for you to take.)

If you end up using the tool, please send me any feedback on how to improve it via the existing bogle.tools/saving thread or via Private Message or even this thread if that makes sense.

[ruralavalon]

Hi All,

My wife doesn't work currently. Few years ago when my income was under the limit, I had invested approximately 11K in a spousal IRA. This includes 1K of non-deductible IRA.

I have already maxed out my 401K for last year. Our income is over the income limits for deduction. I would like to contribute more on a IRA that she can control. Is there an option to do ROTH IRA in her name ? Should I add more as a non-deductible IRA ?

Thanks. Please let me know if more information is required.

Consider two Backdoor Roth IRAs, one for each of you.

What is your Modified AGI? She may be able to make deductible contributions bro an IRA, depending.

[techinvestor23]

Thanks Rob for the tool. This is very helpful.

I have not been taking advantage of the mega backdoor Roth. I will look into this.

Since my wife has a after-tax IRA, does that impact my ability to do mega backdoor Roth ?

[retiredjg]

Since my wife has a after-tax IRA, does that impact my ability to do mega backdoor Roth ?

No. Her IRA does not affect either your backdoor Roth or mega backdoor Roth.