It is equally important for the non-working spouse to save for retirement as it is for the working spouse. We look at common retirement strategies that can help a non-working spouse save for retirement, including collecting Social Security.

It isn’t unusual to find people diligently planning their careers and retirement.

Many households may have a working couple, but it is important to remember that many households run on a single income. Non-working spouses may include stay-at-home partners, those who are handicapped or physically incapable of working, or for other personal reasons. This means their retirement strategy should include a plan for both spouses, regardless of their earnings from outside the home.

The retirement needs of households with a non-working spouse are comparable to those of the working partner. This means that the living expenses for both must be accounted for without the benefit of a second paycheck. Let us look at common retirement strategies that help the non-working spouse save for retirement.

Spousal IRA

Spousal IRA is like a regular IRA, with the exception being that it is opened in the name of the non-working spouse. To be eligible for spousal IRA, you must be married, file taxes jointly, and contribute an amount equal to or less than you and your spouse’s combined earned income for the year.

Spousal IRAs have the same annual contribution limits as any other IRA.

If both spouses are under age 50, the maximum contribution is $6,500 per individual in 2023 for a total contribution of $13,000. (It is $7,000 per individual for 2024.)

For those 50 and older, the maximum contribution per individual is $7,500 for a total contribution of $15,000. (The maximum is $8,000 for 2024.)

If one spouse is under 50 and the other 50 or over, the total contribution is $14,000 — $6,500 for the spouse under 50 and $7,500 for the spouse 50 or older.

One of the major drawbacks of this IRA is the contribution limit set on it. When you have to contribute to two IRAs, one for yourself and the other in your spouse’s name, the contribution limit is doubled. If you and your spouse qualify individually for each, you can have a Traditional IRA for yourself and a Roth IRA for your spouse or any such combination.

Social Security

Through Social Security, the non-working spouse can independently collect 50% of what the working spouse receives after retirement. For example, if an amount of $1,000 is collected in a month, then your spouse can independently collect $500 for a total of $1,500. The non-working spouse is eligible to generate income once he or she reaches retirement. If they don’t have any independent Social Security benefits, they can continue to collect 50% after the working spouse dies.

The non-working spouse can collect the ‘spousal’ benefits at retirement, which usually amounts to 50% of the monthly Social Security payment that the working partner receives. The amount will vary depending on the age at which the benefits are first claimed. There are some minimal restrictions. If you start collecting Social Security benefits at the age of 62, your benefits will be reduced by 25%, and your spouse’s benefits will be 50% of your reduced amount.

Even if the non-working spouse is older than the working one, he or she cannot start collecting Social Security until the working spouse does. If the non-working spouse is younger, then even if you have started collecting the Social Security benefits, he/she cannot do so until they reach retirement age. However, the only exception is when the non-working spouse cares for a child younger than 16 years. You can determine the impact of early retirement on spousal benefits here.

It is crucial to remember that Social Security alone will not be enough to meet the financial requirements of most retired couples. Every couple must have other retirement strategies in place to build their retirement income.

If your spouse is self-employed instead of being unemployed, he or she will have to pay 15% of income in Social Security Tax. This means they would be able to collect Social Security independently. A self-employed spouse can also open a Keogh or SEPIRA plan and/or a Solo 401(k) and contribute on his or her own behalf.

It is important for couples to remember that it is equally essential for the non-working spouse to save for retirement as funding for the working one as the retirement assets are shared between the two.

Retirement planning for two using one income isn’t as simple as it sounds. The working spouse must check the eligible criteria and be wise about investing in the retirement plan. Even though the maximum annual contribution limit may not seem significant, if you contribute that amount each year, you could make a real difference in retirement savings over time.

• When You’re Really Late to the Retirement Planning Game
• What a Spouse Should Know About Your Finances
• Social Security Benefits If You’ve Been Married More Than Once
• Estate Planning Without Your Spouse

Reviewed October 2023

About the Author

Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He regularly writes for blogs at MoneyForLunch, Biggerpocket, SocialMediaToday, NuWireInvestor & his own blog for Self Directed Retirement Plans. He writes about topics related to retirement planning, investing, and securing future.