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retirement

IRAs for the Unemployed

If you or your spouse has earned income for the year, you can fund an IRA.

Do I need to have a job in order to contribute to an IRA?

Not necessarily. You usually need to have earned income from a job sometime during the year to contribute to an IRA for yourself. (Unearned income from pensions, investments or Social Security doesn’t qualify.) However, if you’re married and don’t work but your spouse does, then he or she can contribute to a spousal IRA for you. So stay-at-home parents, retirees with a spouse who is still working, and others who were unemployed for the year but had a spouse who earned an income have a chance to boost tax-advantaged retirement savings.

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The working spouse can contribute up to $5,000 to his or her own IRA and up to $5,000 for the nonworking spouse for 2012, as long as the working spouse’s annual income was at least as much as the combined contributions. You can add an extra $1,000 for each spouse who is age 50 or older. You still have until April 15, 2013, to contribute to an IRA for 2012. For 2013, the contribution limit has increased to $5,500 per person, with the catch-up contributions remaining at $1,000 for people age 50 or older.

The spousal IRA can be either a Roth or a traditional IRA. To qualify for a Roth for 2012, the adjusted gross income on your joint tax return must be less than $183,000 (the amount you can contribute starts to phase out above $173,000). Single filers can contribute to a Roth as long as their income was less than $125,000 (the amount you can contribute starts to phase out above $110,000). The income limits are slightly higher for 2013 contributions –- see my column for details. You can access Roth contributions anytime without taxes or penalties, and you can withdraw earnings tax-free and penalty-free after age 59½ as long as you’ve had a Roth for at least five years.

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There are no income limits for contributing to a traditional IRA, but your income must be below certain limits for your contributions to be tax-deductible. Withdrawals (except for any non-deductible contributions) will be taxable. See Fund an IRA, Cut Your Taxes for details.

Keep in mind that kids who have any income from a job can make IRA contributions, too -- even if they just earned a little money from babysitting, mowing lawns or any other part-time job -- as long as their contributions are not more than the amount of money they earned for the year. See Open Low-Minimum Roth IRAs for Kids for details.

For more financial-planning advice, log into our Jump-Start Your Retirement Plan Days on February 7 and February 12. You can get a free one-on-one session with a member of the National Association of Personal Financial Advisors (NAPFA). We’ll be featuring four chat rooms hosted by financial advisers, focusing on taxes and retirement, saving for retirement, income in retirement, and other financial challenges. See Jump-Start Your Retirement Plan Days 2013 for more information and to sign up for the live chats.

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