![]() Single-income couples may face a harder choice. (FRA is 66 for people born in 1954 but it gradually rises to 67 for people born later.) Meanwhile, the lower earner could take his or her benefit earlier to provide income to pay expenses. Benefits grow 8% each year after full retirement age until age 70. One solid strategy for a dual-income couple is for the higher earner to delay claiming until age 70. You and your spouse can maximize Social Security by coordinating when you claim benefits. ![]() But once Roxanne opens her own plan, she can choose from a broader mix of funds. Until now, they’ve been limiting themselves to the low-cost index funds offered through Jesse’s workplace account. Once her website starts earning money, she plans to open a solo 401(k) or self-directed IRA to ramp up their retirement savings. About six months ago, Roxanne launched her own business,. Jesse and Roxanne Lopez, who live in New Albany, Ohio, have mostly contributed to his retirement accounts for the past 14 years as she stayed home with their three children and he worked as an anesthesiologist. In 2020, the couple can deduct up to $6,000-$7,000 if the non-working spouse is 50 or older-in contributions to a traditional IRA as long as the couple’s MAGI is $196,000 or less. One option for couples who file a joint return is for the working spouse to open and contribute to a Roth or traditional “spousal IRA” for the nonworking partner. You will need to get even more creative if only one spouse is working. Your individual plans may look unbalanced, but think of them as a marital asset rather than two personal accounts, says Eric Ross, a CFP with Truepoint Wealth Counsel in Cincinnati.ġ0 Things You Must Know About Roth Accounts It often makes sense to invest most of the Roth 401(k) in stocks to take advantage of the higher growth potential free from taxes, while opting for a more conservative mix in the traditional 401(k) because you’ll probably take that money out first. If that isn’t an option, you can roll the after-tax contributions to a Roth IRA once you retire or leave your job (you’ll owe taxes on any pretax amount), and roll the earnings on the after-tax portion and pre-tax deferrals to a rollover IRA to continue tax-deferred growth. Depending on your plan, you may be able to roll that money into a Roth IRA each year as an in-service distribution. Or, some plans may allow employees to save after-tax money once they have maxed out their pretax deferrals, up to an overall limit of $57,000 in 2020 ($63,500 if you’re 50 or older). If only one spouse has access to a Roth 401(k), consider focusing on the Roth for that spouse and traditional pretax savings for the other spouse, says Gugle. If your income is too high for a Roth IRA, you may be able capitalize on after-tax or Roth savings in your 401(k), where you don’t need to worry about income limitations. The contribution limits then start to phase out, before disappearing completely once your MAGI hits $206,000. If you and your spouse file your taxes jointly, you can each contribute up to $6,000 to a Roth IRA in 2020 ($7,000 if you are 50 or older) as long as your combined modified adjusted gross income is less than $196,000. Withdrawals are also tax-free once you reach age 59½ and you’ve held the Roth for five years. You invest in a Roth with after-tax dollars, and your money continues to grow and compound free of taxes. Start by picking the best of those limited funds-even if they are all, say, small-cap stock funds or international stock funds-and fill in the gaps from the other spouse’s menu of investments to balance out your overall portfolio.Ĭonsider opening a Roth IRA as well. Say one spouse has a huge array of investments to choose from and the other has more-limited options. (The limit for 401(k) and most other workplace retirement plans is $19,500 in 2020, with catch-up contributions of $6,500 for those 50 or older.) ![]() ![]() That’s especially important if you can’t afford to max out your plans. After setting aside enough money so that each of you gets the employer match, if any, compare the menu of investment options, fees and any advantageous features to decide how you and your spouse should allocate your income. ![]()
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