A common question we hear from clients is whether or not they can combine their retirement accounts with their spouse. A joint retirement account makes sense, especially if you’re accustomed to combining money in a joint savings account. However, there is no such thing as a joint retirement account.
You can think of retirement accounts as being like credit scores. Each person has their own, and they can’t be combined when you’re married. But, there is a caveat. A spouse can name the other as a beneficiary. In this instance, your spouse would have access to your accounts and funds should something happen to you.
Why Both Spouses Should Open Up Separate Retirement Accounts
The IRS requires that 401(k) and IRA accounts remain in each person's name. This way, they can individually participate and contribute to their employer’s 401(k) plan. Over time, both plans will grow alongside each other, resulting in a diversified portfolio that includes a mix of short- and long-term assets.
Not only does having your own retirement accounts allow you to create a diverse portfolio, but also it allows you to receive the greatest tax benefits. For example, both traditional and Roth IRAs have the same contribution limits of up to $6,000. But with two accounts, you can make a total contribution of up to $12,000.
If One Spouse isn’t Working, a Spousal IRA is an Option
A spousal IRA may sound like a joint retirement account, but it’s not. However, it may be a great option if one spouse is unemployed or making a low income.
A spousal IRA allows the working spouse to contribute to an IRA that is in the name of the non-working spouse who has little or no income. This type of account allows both couples to contribute up to $12,000 annually. You can learn more about spousal IRAs here.
But…You Should Consolidate Your Retirements
Even though you can’t merge your retirement account with your spouse’s, you can consolidate your personal accounts to make your investments easier to manage. Consolidation is possible as long as the account is the same. For example, you can combine an SEP IRA with a traditional IRA, but you can’t combine a traditional IRA with a Roth IRA.
The benefits of consolidating your retirement accounts are:
Even though you can’t combine your retirement accounts with your spouse, there are plenty of ways to maximize your savings, take advantage of tax breaks and prepare for a bright and healthy future. To discuss your retirement accounts and how to streamline them, contact Leonard Financial Solutions today.
You can think of retirement accounts as being like credit scores. Each person has their own, and they can’t be combined when you’re married. But, there is a caveat. A spouse can name the other as a beneficiary. In this instance, your spouse would have access to your accounts and funds should something happen to you.
Why Both Spouses Should Open Up Separate Retirement Accounts
The IRS requires that 401(k) and IRA accounts remain in each person's name. This way, they can individually participate and contribute to their employer’s 401(k) plan. Over time, both plans will grow alongside each other, resulting in a diversified portfolio that includes a mix of short- and long-term assets.
Not only does having your own retirement accounts allow you to create a diverse portfolio, but also it allows you to receive the greatest tax benefits. For example, both traditional and Roth IRAs have the same contribution limits of up to $6,000. But with two accounts, you can make a total contribution of up to $12,000.
If One Spouse isn’t Working, a Spousal IRA is an Option
A spousal IRA may sound like a joint retirement account, but it’s not. However, it may be a great option if one spouse is unemployed or making a low income.
A spousal IRA allows the working spouse to contribute to an IRA that is in the name of the non-working spouse who has little or no income. This type of account allows both couples to contribute up to $12,000 annually. You can learn more about spousal IRAs here.
But…You Should Consolidate Your Retirements
Even though you can’t merge your retirement account with your spouse’s, you can consolidate your personal accounts to make your investments easier to manage. Consolidation is possible as long as the account is the same. For example, you can combine an SEP IRA with a traditional IRA, but you can’t combine a traditional IRA with a Roth IRA.
The benefits of consolidating your retirement accounts are:
- View your portfolio holistically
- Monitor your investments in one central location
- Prepare your taxes more easily
- Simplify your finances and retirement savings
- Lower administrative costs
Even though you can’t combine your retirement accounts with your spouse, there are plenty of ways to maximize your savings, take advantage of tax breaks and prepare for a bright and healthy future. To discuss your retirement accounts and how to streamline them, contact Leonard Financial Solutions today.
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