Retirement

Can We Both Fully Fund Roth IRAs?

I recently wrote a post about Roth IRA contribution limits. Reader Kara left the following comment:

I have a quick question that I can’t seem to find the answer to. Are the Roth IRA limits simply doubled for a married couple? My best guess is that each person individually opens a Roth IRA and they each have a $4000 annual contribution limit, but I haven’t explicitly read this anywhere.

I did a little research and I found this information over at Fool.com (a prominent investing website):

If you have earned income, then you may contribute to a Roth IRA regardless of your age, provided your modified AGI doesn’t exceed certain limits. If you’re a single filer, then you can make a full contribution to a Roth if your modified AGI is less than $99,000. You may make a partial contribution to a Roth when your modified AGI is between $99,000 and $114,000. But when your modified AGI reaches $114,000, you’re no longer eligible.

The phase-out range for a Roth IRA contribution for a married couple filing a joint return is $156,000 to $166,000. For a married person filing separately, the phase-out range is $0 to $10,000.

And the following information at the IRS website, Publication 590:

Generally, you can contribute to a Roth IRA if you have taxable compensation (defined later) and your modified AGI (defined later) is less than:

 

  • $160,000 ($166,000 for 2007) for married filing jointly or qualifying widow(er),
  • $10,000 for married filing separately and you lived with your spouse at any time during the year, and
  • $110,000 ($114,000 for 2007) for single, head of household, or married filing separately and you did not live with your spouse at any time during the year.

Finally, here’s a quote from Fairmark.com about Spousal Contributions (for a spouse that does not have earned income):

 

If you’re married and you file a joint return, you can make a regular contribution to a Roth IRA even if you have little or no taxable compensation income. Solely for the purpose of determining how much you can contribute to an IRA, you’ll be treated as if you had taxable compensation income equal to:

  • Your taxable compensation income (if any), plus
  • Your spouse’s taxable compensation income (if any), minus
  • Your spouse’s regular contributions to traditional IRAs and Roth IRAs.

For most people this rule works out very simply: if either spouse works for a living and earns at least double the IRA contribution limit, both spouses can contribute the maximum amount to an IRA.

 

Basically, if you file as ‘married filing jointly’ and your combined income is LESS than $166,000 (in 2007), you can BOTH fully fund Roth IRAs. (Please note: I am NOT a tax professional. Please, do your own research and consult a qualified financial professional before making ANY financial decisions.)

Also, the numbers listed above vary because the articles that I found were written at different times. For the most up-to-date information, please check the IRS website and Publication 590.

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6 thoughts on “Can We Both Fully Fund Roth IRAs?

  1. Since the reader’s question does not explicitly mention the income limits, I will only comment on the act of making the contribution and the maximum contribution.

    Since IRA stands for Individual Retirement Arrangement, the contribution limits are per individual. In the case of a married couple, each individual can make a contribution up to the maximum allowed (assuming the income limits aren’t exceeded as you detailed).

    It is easy to get confused when looking at an IRA as a married couple but each account is unique to each individual. It is not possible to have a “joint” IRA, the husband has his own IRA and the wife has her own IRA and the contribution limits are also unique to each account.

  2. One error … as a married couple filing jointly, you can fully fund your IRAs if you have an AGI of $156,000 or less (in 2007) as mentioned in the article. Once your income exceeds $156,000, the amount you can contribute to your IRA decreases linearly with the amount you make over $156,000 (until $166,000 when you can contribute nothing). This means that if you make $161,000 (50% more than the $156,000 phase-out minimum) you can only contribute 50% of the 2007 $4000 limit (each). Hope this helps!

  3. this is great information! i’ve been looking for a nice summary of what my wife and I are able to contribute. Now to fund both accounts to the max!

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