Married and Filing Jointly? What You Need to Know About “Joint Roth IRAs”

Newlyweds, this one's for you. Learn how marriage affects your IRA, whether you can open a joint Roth IRA, and the importance of discussing
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Are you a newlywed and wondering if it’s possible to fund a joint Roth IRA? Planning a wedding can be tricky enough. When you add combining finances and filing taxes jointly, it can undoubtedly stifle the romance.

In honor of National Marriage Week and Valentine’s Day, we want to equip you with some pointers about how marriage affects your IRA. We’ll even answer some FAQs like, “Can you have a joint Roth IRA?” and “What are Roth IRA joint income limits?” So go ahead and shoot a steamy text to your spouse, and set up a date to talk finances. (Hey, it’s National Marriage Week. We’re allowed to say that.)

Why It’s Essential to Talk About Investing and Retirement Planning With Your Spouse

In a recent NPR podcast, financial therapist Amanda Clayman discussed the importance of creating a safe space to discuss finances in marriage-not simply for its utility but because it can bring spouses closer together and create what she calls “financial intimacy.”

Discussing spending and investing habits can make you feel vulnerable. However, it’s vital to keep that line of communication open. How we view money reveals a lot about what’s important to us and what we want to prioritize. After all, money affects almost every aspect of our lives. We use it, share it (and hope to earn it) every day. As Clayman points out, we even begin navigating finances on the first date when we decide how to split the bill.

Creating an open line of communication about finances-not just having financial conversations when the budget is tight-builds trust between spouses. Similarly, it empowers spouses to create an equitable, transparent, and inclusive financial relationship.

One financial aspect of great importance is investing for the future. It’s important to be on the same page about the future you want to build together and what actions you need to take today to make it happen.

Can You Have a Joint Roth IRA?

Technically speaking, there’s no such thing as ajoint Roth IRA” or “joint IRA” for spouses. However, there is such a thing as a spousal IRA.

Generally, individuals can’t contribute to an IRA unless they earn an income in a given year. A spousal IRA is an exception to this rule, allowing a working spouse to contribute to a traditional or Roth IRA in a non-working spouse’s name as long as they’re married and filing taxes jointly. This effectively allows couples to invest more for retirement together than a single-income household otherwise could due to individual IRA contribution limits.

A spousal IRA allows a working spouse to take advantage of the maximum IRA contribution limit, both individually and for the non-working spouse, provided they have enough earned income to cover both contributions. In 2022, individuals under 50 can contribute up to $6,000 to an IRA per year, meaning a couple can invest a combined $12,000 annually, even if one spouse is not working. Plus, individuals 50 and older can contribute an additional $1,000 per year, meaning you could potentially contribute $14,000 annually as a couple (into separate IRAs, of course).

Another important note is that you can have as many IRA accounts as you’d like. Just know that the total contributed across all accounts must be within the IRS’ contribution limits per individual. The good news is that even if you didn’t contribute to an IRA in 2021, you can still contribute for the 2021 tax year up until Tax Day (April 18, 2022). Can you think of a better way to celebrate Valentine’s Day than investing in your and your honey’s financial future? (We sure can’t.)

Can You Name A Spouse As a Beneficiary of a Traditional or Roth IRA?

Though you can’t contribute to a “joint Roth IRA,” you can designate your spouse as the beneficiary of your IRA. This ensures your spouse inherits your IRA without having to go through a probate process, and whether or not you have a will.

Everyone should review the status of their IRA’s beneficiary designation form on an annual basis. You aren’t required to name a beneficiary to an IRA, but your plan agreement will state a default beneficiary of your account. To ensure your retirement assets transfer to your spouse (or other beneficiary), you should verify the beneficiary status of your account-even if you live in a community property state.

The SECURE Act of 2019 provided new rules for beneficiaries inheriting IRAs depending on their relationship to the account holder. Generally, spouses enjoy the greatest tax benefits when inheriting IRAs. But, it may be wise to discuss with a tax professional the implications of designating certain beneficiaries to your IRA.

To add your spouse as a beneficiary of your Alto IRA or CryptoIRA, complete the steps here.

Are There Roth IRA Joint Income Limits?

Unlike with traditional IRAs, there are income-based restrictions for those married filing jointly who wish to contribute to a Roth IRA. Based on the 2022 IRS guidelines, the following income limits apply if you are married and filing jointly:

  • If your modified AGI is less than $204,000, you can each contribute up to the $6,000 limit ($7,000 if you’re older than 50)
  • If your modified AGI is between $204,000 and $214,000, you can each contribute a reduced amount
  • If your modified AGI is $214,000 or more, you cannot contribute

Understanding Roth IRA joint income limits is crucial because it allows you to make a game plan for investing. For example, if you and your spouse are approaching the income limit, you may want to prioritize maximizing your Roth IRA contributions while you’re still eligible. Certainly, once married couples filing jointly surpass the Roth IRA contribution limit, they can still keep their existing Roth accounts and reinvest their investment returns there. Couples who are no longer able to make contributions to a Roth can of course open and contribute to traditional IRA accounts.

Read our blog post on the differences between traditional and Roth IRAs and how to choose what’s best for you.

Why Invest in Alternatives As a Married Couple?

It’s no secret that marriage offers a slew of benefits, especially financial and tax-related. Similarly, investing in an IRA offers significant tax benefits, regardless of your marital status.

Investing in Alternatives With an IRA Offers Massive Tax Advantages

A Roth IRA offers tax-free gains and distributions for those who are eligible. On the other hand, a traditional IRA offers tax-deferred gains and tax-deductible (or pre-tax) contributions. When using an IRA to invest in alternatives like crypto, gains and individual trades are not taxed, meaning you can sell crypto holdings within your IRA without the hassle of reporting them on your taxes.

Do your research and choose which type of IRA is right for you and your family. And remember-the earlier you start investing, the longer you have to take advantage of valuable compounding interest.

Alternatives Can Help Diversify Your Retirement Portfolio

If both you and your spouse already have a 401(k), now may be a great time to consider diversifying your portfolios with alternatives. Investing 100% of your IRA in the same stocks and bonds as your employer-sponsored retirement account is a missed opportunity.

Allocating a portion of your retirement funds into alternatives-like startups, real estate, farmland, music royalties, securitized art, shares of fine wine, crypto, and more-creates the potential for outsized returns. An IRA for alternative investments can be funded by making direct contributions, transferring funds from another IRA, or by rolling over all or just a small portion of an existing 401(k) account. As you begin your life together, creating a nest egg for the future is vital, and a diverse portfolio can be the key.

It’s How the Ultra-Wealthy Invest

Ultra-wealthy investors’ portfolios often include between 10% and 50% alternatives. A stunning example of this is Yale University’s endowment, which saw a 40.2% return in 2021 due in part to its alternative investment allocation.

Until recently, alternatives were out of reach for the average investor. This was due to their requiring significant capital and being fairly complicated to invest in. Thankfully, you don’t have to be a millionaire (or an Ivy League endowment fund) to invest in alternatives today. Alto was created to make it easy for everyone-including newlyweds-to invest in alternatives with ease using an IRA.

Alto Gives You Two Ways to Invest in Alternatives

There are two easy ways to invest in alternative assets through a self-directed IRA at Alto:

  1. The Alto IRA lets you invest your IRA funds into alternative assets with 75+ partners-such as startups, securitized art, real estate, private equity, and more.
  2. The Alto CryptoIRA makes it easy to invest in more than 135 coins and tokens with $10 investment minimums. Plus, we recently reduced our crypto trading fee to 1% based on user feedback.

So, are you ready to start investing in alternatives tax-free or tax-deferred? Open an account today. Once you do, you can also refer your sweetheart to receive a $50 referral bonus.

Happy Marriage Week, lovebirds! Got questions? Contact us here.


Still unsure and want to speak with someone?

Set up a time here.