Gary W. Pelletier, CLU, ChFC, AIF®

Northeast Planning Associates, Inc.

Corporate, Estate

& Financial Planning


IRA Rules for Minors and Non-Working Spouses

| March 24, 2015
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In general to establish an IRA (Traditional or Roth) an individual: 

1. Must have compensation (either earned income of an employee or self-employed, or alimony). 

 AND 

 2. Must meet the following income guidelines:

Traditional IRA – Fully Deductible if AGI between:

Active participant in employer-sponsored plan: 
Married Filing Jointly - $96,000 - $116,000 
Single - $60,000 - $70,000

Spouse is active participant in employer-sponsored plan:
Married Filing Jointly - $181,000 - $191,000
Single – Lesser of $5,500 (plus Catch Up) or 100% of earned income without regard to AGI

Roth IRA – Availability Limits

Married Filing Jointly – fully available if AGI under $181,000 (phased out from $181,000 – 191,000)
Single – fully available if AGI under $114,000 (phased between $114,000 - $129,000)

The compensation requirement is different for a non-working spouse. A contribution may be made to an IRA owned by a non-working spouse up to the maximum allowed plus catch-up amount if applicable as long as the family’s Adjusted Gross Income (AGI) exceeds the amount of the contribution.

Example: Bill, age 45, works full time and earns $80,000/year. He is contributing to a traditional IRA each year. Bill and his stay-at-home wife Mary would like to begin saving more towards their retirement. After they consult with their financial advisor, they decide to open a spousal IRA for Mary. In addition to Bill’s IRA contribution, they can also contribute up to the maximum ($5,500 in 2014) to the new IRA for Mary. 

 For a minor child, he or she must have earned income. IRAs established for a minor cannot be funded with gifts from parents or grandparents. The earned income of the minor must be at least equal to the IRA contribution amount in the year applied. 

Example: The parents of a 4 year-old girl booked a modeling gig for her at a local clothing store and earned $1,500 for the job. This was the child’s only earned income of 2013. The parents of the child may establish an IRA for the benefit of the child and contribute up to $1,500 that year. If the child does not earn income in 2014, no 2014 contributions can be made into the IRA.

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