What Are the Roth IRA Rules for Married Couples?
Money Girl explains what married couples need to know about contributing to a Roth IRA.
A Money Girl reader named Monica asks:
“I’m getting married later this year and we plan on filing taxes jointly. I just found out that due to our combined income, I won’t be eligible for my Roth IRA this year. What should I do if I’ve already made contributions to the account?”
Congratulations to Monica for her upcoming wedding!
Buy Now
In this episode we’ll cover what married couples need to know about contributing to a Roth IRA. You’ll find out what to do if getting hitched causes a separation between you and your Roth IRA.
Sponsor: Squarespace, the all-in-one platform that makes it fast and easy to create your own professional website, e-commerce site, or online portfolio. For a free trial and 10% off, go to Squarespace moneygirl and use offer code MoneyGirl.
Click here to subscribe to the weekly Money Girl audio podcast—it’s FREE!
Roth IRA Rules for Married Couples
A Roth IRA is an individual retirement plan that’s similar to a traditional IRA in many ways, but has some key differences that married couples need to know.
The major benefits of a Roth are that distributions can generally be made tax free, you don’t have to take withdrawals in retirement, and you can leave funds in the account as long as you live. These advantages don’t change when you get married.
However, whether you’re eligible to make contributions in the first place, and the amounts you can put in each year, hinge on your income and tax filing status. You’d think that the contribution limit for a married couple would be double what it is for a single—but it’s actually much less.
Getting married means you can no longer file taxes as a single person. Married couples must choose to file taxes either as married filing jointly or married filing separately. If you’re married on the last day of the year, the IRS consider you to have been married for the entire year for tax purposes.
Unlike a traditional IRA, you become ineligible to make contributions to a Roth IRA when you’re considered a high earner.
How Much Can You Contribute to a Roth IRA?
No matter your tax filing status, the maximum amount you can contribute to either a traditional or a Roth IRA (or a combination of both) for 2014 is $5,500. You’re eligible for an additional “catch up” contribution of $1,000 if you’re age 50 or older, for a total of $6,500.
Unlike a traditional IRA, you become ineligible to make contributions to a Roth IRA when you’re considered a high earner. In other words, when you have taxable income over a certain amount, you’re simply not allowed to contribute to your Roth for that tax year.
What Is the Roth IRA Contribution Limit?
Here are the Roth IRA limits for adjusted gross income, depending on your tax filing status, for 2014:
- Single: $129,000
- Head of household: $129,000
- Qualifying widow(er): $191,000
- Married filing jointly: $191,000
- Married filing separately and you did not live with your spouse: $129,000
- Married filing separately and you did live with your spouse at any time during the year: $10,000
Note that the income thresholds for married couples applies to their combined income. For instance, when a married couple files jointly and has household adjusted gross income over $191,000, both spouses are ineligble to contribute to a Roth IRA.
So exceeding the allowable income limit means that both Monica and her new spouse will be ineligible to contribute to a Roth IRA.
What Is the Roth IRA Contribution Phase Out Limit?
But even if you earn less than the Roth IRA contribution limits, there are still restrictions on how much you can contribute when your income falls into these phase-out zones, for 2014:
- Single: between $114,000 and $129,000
- Head of household: between $114,000 and $129,000
- Qualifying widow(er): between $181,000 and $191,000
- Married filing jointly: between $181,000 and $191,000
- Married filing separately and you did not live with your spouse: between $114,000 and $129,000
- Married filing separately and you did live with your spouse at any time during the year: between $0 and $10,000
Having income in a phase-out zone means you can still put money in a Roth IRA, but you can’t contribute the maximum amounts of $5,500 or $6,500 for 2014.
To learn more about how to calculate your eligible contribution amount see IRS Publication 590, Individual Retirement Arrangements (IRAs)opens PDF file or consult with your accountant or retirement plan custodian.
Also see: What Is the Marriage Tax Penalty?
What If You Contribute Too Much to a Roth IRA?
If you’re like Monica and find out that you’ve already contributed too much to a Roth IRA, there’s an easy way to fix it. Simply withdraw the contributions before the due date (including extensions) for filing your tax return. For instance, if you over-contribute for 2014, withdraw excess contributions and their earnings before the tax filing deadline in April 2015.
There’s even more good news: If you miss the tax filing deadline, you still have time to correct excess Roth IRA contributions. You can withdraw them within 6 months after the due date for your return (excluding extensions) by filing an amended tax return.
See also: Money Management Tips for Married Couples
Additionally, you can apply the excess contributions from one year to a later year, as long as they don’t exceed your maximum allowable limit for the future year. Your account custodian can calculate the exact amount you need to withdraw or apply to a future year and make sure the transaction is completed on time.
If you fail to move funds to a future year or miss the deadline to make a withdrawal, you’ll be subject to a 6% excise tax on excess contributions.
What Happens to Your Roth IRA When You Become Ineligible?
Being ineligible to contribute to a Roth IRA doesn’t change her account in any way. She can keep it indefinitely and buy and sell the investments held in the account as she likes. She just can’t make any new contributions.
And if the IRS changes the rules and allows higher Roth IRA income limits, or if Monica’s household income decreases, she may be eligible to make contributions again in the future.
But don’t stop investing just because you become ineligible to contribute to a Roth IRA. Instead, max out a retirement plan at work, a traditional IRA, or a retirement account for the self-employed, if you work for yourself.
Get More Money Girl!
For exclusive money tips not covered on the Money Girl podcast, click here and sign up for the free Money Girl Newsletter!
To connect on social media, you’ll find Money Girl on Facebook, Twitter, and Google+. Also, if you’re not already subscribed to the Money Girl podcast on iTunes, that’s how most people get the show. Subscribing is always free and makes sure that you’ll get each new weekly episode as soon as it’s published on the web.
There’s a huge archive of past articles and podcasts if you type in what you want to learn about in the search bar at the top of the page. Here are all the many places you can connect with me, learn more about personal finance, and ask your money question:
Facebook- Google+
- Money Girl podcast on iTunes (it’s free to subscribe!)
- Email: money@quickanddirtytips.comcreate new email“>money@quickanddirtytips.comcreate new email
Click here to sign up for the free Money Girl Newsletter!
Download FREE chapters of Money Girl’s Smart Moves to Grow Rich
To learn about how to get out of debt, save money, and build wealth, get a copy of my book Money Girl’s Smart Moves to Grow Rich. It tells you what you need to know about money without bogging you down with what you don’t. It’s available at your favorite book store in print or as an e-book for your Kindle, Nook, iPad, PC, Mac, or smart phone. You can even download 2 free book chapters at SmartMovesToGrowRich.com!
Young couple saving image courtesy of Shutterstock.
You May Also Like…
About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.
