Retirement is expensive. So, unless you are relying on a large inheritance to carry you though, you'll need to save as much as possible for retirement during your working years. The government encourages people to save as much as possible by providing a tax break on the contributions made to an IRA, or individual retirement account. But, the Internal Revenue Service sets limits on how much you can contribute each year to an IRA. There are different limits for single taxpayers and married couples because the government recognizes a couple will likely need twice as much money to retire on than one person.
The maximum anyone under the age of 50 can contribute to an IRA is $5,000 per year. The maximum limit for couples is $10,000, and it doesn't matter if that comes from one person or both. IRS rules allow married couples to each make the maximum contribution even if one of the spouses didn't work that year or earn any income.
Even if only one of the spouses earned income during the tax year, the income reported to the IRS must be greater than the combined contributions the couple makes to their IRA. In other words, if a couple earned $8,000 in a year, but makes a $9,000 total contribution to one or more IRAs, it would raise red flags with the IRS.
The IRS uses a Modified Adjusted Gross Income calculation to determine your IRA eligibility. Married couples making more than $173,000 can't contribute to a Roth IRA. The rules are different for traditional IRAs. Anyone with sufficient income can contribute the maximum amount to a traditional IRA in any year -- the only question is whether the contribution is tax deductible. As of the 2012 tax year, for example, married couples who are covered by retirement plans at work lose their tax deduction on IRA contributions once their income reaches $92,000. But married couples who have no retirement plans at work can deduct their IRA contributions no matter how much they make.
Over 50 Rules
If you're looking for one more reason to grow old together, you might find one with a slightly bigger IRA contribution. The maximum contributions for single filers goes up to $6,000 when you turn 50. If your spouse is also at least that old, your couple's cap goes up to $12,000.
Tim Grant has been a journalist since 1989 and has worked for several daily newspapers, including the Charleston "Post & Courier," the "Savannah News-Press," the "Spartanburg Herald-Journal," the "St. Petersburg Times" and the "Pittsburgh Post-Gazette." He has covered a variety of subjects and beats, including crime, government, education, religion and business. He graduated from The Citadel with a Bachelor of Science in business administration.