A spousal IRA is a tax break offered by the Internal Revenue Service that can help many married couples increase their retirement savings, writes Lori Ioannou for The Wall Street Journal.

Spousal individual retirement accounts make it possible for a working spouse to contribute to the retirement savings of their non-working or low-earning spouse. These accounts can be set up as a traditional IRA, which allow couples to save for retirement on a tax-deferred basis, or a Roth IRA, which allow for saving for retirement on a tax-free basis.

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They are not a unique type of IRA or a joint account. Instead, they are separate IRAs that are opened in the name of the non-working or low-income-earning spouse and are owned by them.

To qualify for this tax benefit, spouses have to file taxes jointly as a married couple and at least one spouse must have taxable compensation.

These vehicles not only help married couples contribute more to their retirement savings each year while reaping the tax advantages, but they also have a psychological benefit, according to financial planners.

“Often, it helps the non-working or low-earning spouse to feel good about their value they bring to the household, and be more involved in the retirement-savings process,” said Katherine Tierney, a certified financial planner and senior retirement strategist at Edward Jones.

Moreover, these types of accounts offer non-working or low-earning spouses some financial independence. As the assets are in their name, they have access to retirement funds in case they become widowed or divorced.

The only problem spousal IRAs have is that “despite the advantages, not many people know about them,” said Stacy Miller, a certified financial planner and chief executive of BayView Financial Planning.

“Any way to save for retirement helps,” said Fred Hubler, the CEO and Chief Wealth Strategist at Creative Capital Wealth Management Group in Chester Springs. “It’s time in the market — not timing the market — that makes all the difference.”

Read more about the spousal IRA in The Wall Street Journal.

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