Spousal IRA contribution for person "not covered" by a retirement plan

[Guest garymc]

I retired last year from a state govt job. I'm 53, collect a pension, and have no earned income. My wife (over 50) makes $70,000 in salary. We file jointly. Can we contribute to a spousal traditional or Roth IRA for me for 2004? The IRS publication seems to say not if I am "covered" or participating in a retirement plan. I am not earning additional retirement benefits or otherwise able to contribute to my future as a retiree. Can the contribution be put into my existing Roth? Does the word spousal indicate an account designation or just a description of how a person with little or no income qualifies to contribute (or have contributions made on his behalf)?

[david rigby]

IRS publication 590 http://www.irs.gov/pub/irs-pdf/p590.pdf

See page 13 for this comment:

"Benefits from previous employer’s plan. If you receive retirement benefits from a previous employer’s plan, you are not covered by that plan."

[Appleby]

Your or your spouse’s participation in an employer-sponsored plan does not affect your eligibility or ability to contribute to an IRA. It only affects your eligibility to claim a deduction for a contribution to a traditional IRA. Therefore, your spouse may contribute to a Roth IRA on your behalf.

The term ‘spousal IRA’ just means

a description of how a person with little or no income qualifies to contribute (or have contributions made on his behalf).

Some financial institutions will flag or designate the IRA as a ‘spousal IRA’… if you have an existing IRA, your spouse may deposit your contribution to that existing IRA.

Since you are not an ‘active participant’ you are able to claim a deduction for your traditional IRA contribution. If your wife is not an active participant, she is also eligible to claim a deduction for her traditional IRA contribution (should she decide to contribute to an IRA), because your joint modified adjusted gross income is less than $150,000.