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Inherited and Spousal IRA: Understanding the Differences


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Individual Retirement Accounts (IRAs) can be a valuable tool for retirement savings, and there are several different types of IRAs available to individuals. Two of these types of IRAs are the Spousal IRA and the Inherited IRA. Spousal IRA The Spousal IRA is a type of IRA that allows a non-working spouse or a spouse with earned income that is less than the contribution limit to make contributions to their own IRA account using their spouse’s earned income. For example, if one spouse has an income of $100,000 and the other spouse has no earned income, the non-working spouse can contribute up to $6,000 (in 2021) to their own Spousal IRA account. The Spousal IRA is subject to the same contribution and distribution rules as a traditional IRA, meaning that contributions made to the account are tax-deductible (if the couple meets the IRS income requirements), and distributions are taxed as ordinary income. The account holder also must start taking Required Minimum Distributions (RMDs) from the account when they turn 72 (or 70 ½ if they reached that age before January 1, 2020). Inherited IRA The Inherited IRA is a type of IRA that is typically established after the death of the original account holder. The account can be inherited by a spouse, another individual, or a trust. The distribution rules for Inherited IRAs depend on several factors, including the age of the original account holder at the time of their death and the relationship between the original account holder and the beneficiary. If the Inherited IRA is inherited by a spouse, the spouse can either choose to treat the account as their own IRA or establish it as a separate inherited IRA. If the spouse chooses to treat the account as their own IRA, they can contribute to the account as if it were their own and must follow the same distribution rules as a traditional IRA. If the Inherited IRA is inherited by a non-spouse beneficiary, the distribution rules depend on whether the original account holder died before or after reaching their RMD age. If the original account holder died before reaching their RMD age, the beneficiary must take distributions from the account each year based on their own life expectancy. If the original account holder died after reaching their RMD age, the beneficiary must take distributions from the account based on the original account holder’s remaining life expectancy or their own, whichever is shorter. In conclusion, understanding the different types of IRAs available can help individuals plan for their retirement and ensure that their savings are distributed according to their wishes. The Spousal IRA and the Inherited IRA are just two examples of IRA options available to individuals throughout their lifetime and beyond. https://inflationprotection.org/inherited-and-spousal-ira-understanding-the-differences/?feed_id=96335&_unique_id=645c3bc314576 #Inflation #Retirement #GoldIRA #Wealth #Investing #ChrisMcIntire #financial #GamePlanForRetirement #investing #money #saving #InheritedIRA #ChrisMcIntire #financial #GamePlanForRetirement #investing #money #saving

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