IRAs Are for Housewives Too

Updated on August 2, 2017
Stir yourself up some financial security. IRAs for housewives and stay-at-home moms.
Stir yourself up some financial security. IRAs for housewives and stay-at-home moms. | Source

Many Americans have objections against women being housewives or stay-at-home-mothers. One of these objections is based upon the belief that they cannot save money for retirement if they do not work outside of the home. This is categorically untrue. Housewives can actively invest in IRAs. In fact, it is written into the tax code.

While you cannot invest in a 401(k) while being a housewife, you can place money in a Roth IRA and/or a Traditional IRA. Marriage has so many benefits, one of them being that your husband's wage can be the basis of your retirement security as well.

This family-friendly IRS rule also applies to men who are stay-at-home dads or homemakers!

IRAs for Non-Working Spouses

The allowance for non-working spouses investing in IRAs is a special part of the Internal Revenue Code section 219(c), (from 1996), and was officially renamed as the Kay Bailey Hutchinson Spousal IRA in 2013.

Kay Bailey Hutchinson, formerly a Republican Senator from Texas, championed the right for women who work inside the home to have their own IRAs based on their husband's income.

This helped ensure that:

  • Married women who contributed to the making of a home would still be secure in their senior years
  • That children could have the benefit of having their mother at home to raise them without fear of financial ruin in the mother's elderly years
  • That the economy would benefit from added money invested in retirement accounts at brokerages

How to Open a Spousal IRA

Women often ask, "How do I open a Spousal IRA?" The answer is that you simply open any Roth or Traditional IRA for yourself the same way a regular working person or your husband would.

There is otherwise no special paperwork. People mistakenly think there is an official "Spousal IRA" account based on the renaming of the tax code to "Kay Bailey Hutchinson Spousal IRA." The tax code was simply renamed this in the Senator's honor.

Spousal IRA Process Checklist

  1. Have a spouse that pays Federal taxes on earned income.
  2. Open a tax-deductible Traditional IRA or non-deductible Roth IRA in your name.
  3. Contribute any amount up to $5,500 total to your IRAs in one year if you are under 50 years of age, or $6,500 if you are over 50.
  4. Ensure that your spouse makes in income at least the amount of money you are investing, combined. For example, if a married couple each places $5,500 into their respective IRAs, the husband must at least have made $11,000 of earned income for the year.
  5. File a joint return with your husband.


That's all you need to do to have a "housewife's IRA," as I like to call it.

I encourage you to open and continuously fund an IRA if you do not have one already. You will remain in full control of the investment decisions as it is your own account.

Investing for Retirement with One Income

One of the problems people can face who invest for two on their spouse's income is not the lack of desire to invest in their IRAs, but the lack of funds to do so. This is a frequent problem facing young married people or people having to financially "start over" especially. Even if you are not grappling with a lower income, it helps to know how you can get the most out of your money at a brokerage.

To make it easier, the below chart illustrates two brokerages that currently have low minimum IRA investment requirements so that you can start from where you are, right now.

Low Minimum Investment IRAs

Brokerage
Investment Minimums
Commission-free Trades
Charles Schwab
Schwab ETFs: price for one ETF share
Yes, on 175 ETFs
 
Schwab mutual funds: $100 minimum invesment, and $1 minimum contributions thereafter
Yes
Fidelity
Fidelity ETFs: price for one ETF sharep
Yes, on 84 ETFs by iShares and Fidelity
 
Fidelity Mutual Funds: Automatic Account Builder: $200/month
Yes

Low Minimum Investment IRAs: Chart Breakdown

From the chart above you can see that ETFs (exchange-traded funds) can give you a great start at both brokerages. Your minimum cost would be only the cost-per-share in many ETFs. There are a number of ETFs that trade below $50/share, some even under $25/share, so you can literally start and continue your IRA investment for under $25 in some cases.

Charles Schwab also offers the $100 minimum investment for all Schwab-brand mutual funds. After you have funded this amount, you can follow up with as little as $1 per contribution. Think of how many times you can find a few extra dollars in your account and just transfer them to your IRA online.

All of these Fidelity and Schwab options in the chart are commission-free, which is important when you are trading in smaller shares or trying to save every bit of money you can.

With the spousal IRA you can rest easy knowing that your retirement choices don't have to be limited by working inside the home!

Sources:

https://www.irs.gov/pub/irs-pdf/p590a.pdf

http://www.schwab.com/public/schwab/investing/accounts_products/investment/mutual_funds/no_load_mutual_funds

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/automatic-investments-eft-for-iras.pdf

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