Preparing for one’s twilight years is already challenging for many in the U.S. In 2019, the median amount that Americans aged 55 to 64 had in retirement accounts was $134,000, according to the Survey of Consumer Finances. (The mean was more optimistic, at $408,000.) That figure has likely gone down due to the pandemic, when people may have paused or borrowed funds, and the recent market downturn.
Yet most personal finance advice focuses on $1 million by the retirement age, usually 65, being a low-end benchmark to retire comfortably. This would mean $40,000 a year upon which to live if you apply the 4% withdrawal rule. Many people are nowhere close to this figure, even when supplemented with Social Security.
Whether or not you utilize a spousal IRA, at least one person should be putting money toward retirement. Although it’s easy to forgo future planning in the name of caring for others and more immediate needs, you need to put on your own financial oxygen mask before assisting others. There are loans your child can take out to pay for college, for example, but no such loan exists to provide you with a comfortable retirement.
So, couples with the means to be thinking about retirement should consider every tool at their disposal. And you don’t have to max out contributions to a spousal IRA. Even contributions less than the $6,000 or $7,000 maximum will be advantageous. Many partners will need to leave the workforce at one point or another—that shouldn’t stop them from protecting their financial futures.
For example, in 2022, those under 50 can contribute up to $6,000 to an IRA; those 50 and above can contribute $7,000 to an IRA. That means an earning spouse under the age of 50 needs an income of at least $12,000 to make full use of a spousal IRA ($6,000 for contributions to their own IRA, and $6,000 for their spouse’s).
Erin Lowry is a Bloomberg Opinion columnist covering personal finance. She is the author of the three-part Broke Millennial series.