Can Married Couples Open a Joint IRA?

The Short Answer: No, But There Are Strategies to Achieve Near-Joint IRA Benefits

No, the I in IRA stands for Individual. IRS rules strictly require single ownership for IRAs, meaning each spouse must maintain their own IRA. However, there are strategies to effectively achieve a joint IRA. Let's explore these options in detail:

Strategies for Joint IRA Benefits

Step 1: Open Separate IRAs and Maximize Contributions

Each spouse can open their own IRA. By ensuring a combined income of at least $11,000 (or $12,000 if one spouse turns 50 or older, or $13,000 if both spouses are 50 or older), both spouses can max out their IRA contributions. For the year 2019, the contribution limits have increased to $6,000 for those under 50 and $7,000 for those 50 or older. This strategy is particularly useful if one spouse has significantly more income than the other.

Step 2: Designate Each Other as Primary Beneficiaries

After maximizing contributions, the next step is to designate each other as the primary beneficiary of the IRA. This allows the surviving spouse to take over as the owner of the deceased spouse's IRA, which provides several benefits:

Complete control over the IRA in the case of a Roth IRA. Flexibility in merging the accounts for easier management. Having all IRA benefits fully intact post-death.

It is important to note that naming a spouse as a primary beneficiary trumps naming them as a contingent beneficiary. This means even if the spouse is listed as a contingent beneficiary, the surviving spouse cannot take over if the primary beneficiary is the deceased spouse.

Key Concepts and Terminology

Joint IRA vs. Spousal IRA

Although there is no such thing as a 'joint IRA,' the concept of a 'spousal IRA' is relevant. A spousal IRA occurs when one spouse contributes to an IRA based on the other spouse's earnings. This is a legally permissible workaround for effectively achieving joint management. Contributions based on the contributing spouse's income can be made to the same IRA each year, regardless of the contributing spouse's change in income source.

Beneficiary Designation

The designation of beneficiaries is crucial. Naming a spouse as the primary beneficiary ensures that they can seamlessly take over the IRA upon death, subject to the IRS rules regarding Required Minimum Distributions (RMDs). If a spouse and a child are both named as primary beneficiaries, the child cannot act as the sole owner even if the spouse dies first.

Conclusion

While a true 'joint IRA' does not exist under IRS rules, married couples can achieve near joint benefits by opening separate IRAs, maximizing contributions, and designating each other as primary beneficiaries. This strategy allows for effectively managing retirement savings and ensuring a seamless transfer of IRA benefits to the surviving spouse.

For more information on IRA contributions, beneficiary designations, and other tax-related matters, consult a qualified financial advisor or the official IRS website.