Spousal IRA Rules

I opened my Roth IRA at Vanguard in 1998 when I was single. I married in 2000 and left my job in October 2005 to be a stay-at-home mom for a few years. I am not collecting income. Do I have to shift my Roth IRA to a spousal IRA?

Good news: You don't need to make any changes or open a new account. You can keep the money where it is, and your husband can make contributions to that account on your behalf as long as he qualifies to contribute to a Roth IRA.

You generally need earned income to contribute to a Roth IRA. If you don't work but your husband does, he can make spousal IRA contributions for you. That means he can contribute up to $4,000 this year ($5,000 if you're 50 or older) into your Roth IRA as well as his own. To make the full $4,000 contribution to either or both accounts, though, your adjusted gross income on your joint tax return for the year must be less than $150,000. The amount he can contribute decreases as income rises between $150,000 and $160,000, at which point no contributions are allowed.

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For more information about Roth IRAs, see Why You Need a Roth IRA and An IRA Owner's Manual. For help figuring out how much money you should be saving for retirement, see our calculator. And for advice on getting started, see my column on Retirement Saving Options.

Does the IRS permit essentially "grossing up" IRA contributions when purchasing front-end load funds? For example, could you invest $4,210 in a fund with a 5% front-end fee because only $4,000 would actually be invested in the IRA?

Nice try, but no. "The contribution limit is $4,000 and there are no exceptions for fees," says Ed Slott, author of Parlay Your IRA Into a Family Fortune.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.