Question
In: Finance
Jack, age 72, and Sydney, age 60, have been married for 20 years. Jack is unemployed...
Jack, age 72, and Sydney, age 60, have been married for 20 years. Jack is unemployed and Sydney earns $20,000. How much can Jack and Sydney contribute to each of their traditional IRA in 2020 respectively?
Jack can contribute $
Sydney can contribute $
How will your answers change if Jack is 60 and Sydney is 48 years old now?
Jack can contribute $
Sydney can contribute $
Solutions
Expert Solution
Individuals without income from jobs generally aren't qualified to add to tax-advantaged retirement accounts, such as IRAs, because they don't have "acceptable" compensation on which to base such contributions. However, there is an exemption for married, nonworking individuals whose spouses are employed.
If the conditions are met, the employed spouse can make an IRA contribution on behalf of a nonworking spouse using the income of the employed spouse to meet the income requirement.
For 2019 and 2020, the individual contribution limit is the lesser of the following two:
- $6,000 a year for individuals under age 50 as of the end of the year and $7,000 for anyone 50 or older
- 100% of eligible compensation
One may contribute those amounts to each of his and spouse’s IRAs, for up to a maximum of $12,000, plus the $1,000 catch-up contribution for whichever spouse is eligible (age 50 or over).
Case 1
Jack can contribute $0
Sydney can contribute $14,000 ($7,000 for her and $7,000 for Jack)
Case 2
Jack can contribute $0
Sydney can contribute $10,000 ($5,000 for her and $5,000 for Jack)
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