These days, it’s not uncommon for the spouse with the highest income potential to provide for the family financially while the other spouse stays home to manage the household.
Although this arrangement can work well for child-rearing or eldercare responsibilities in the short term, it can present long-term retirement income planning risk for the non-working spouse. To mitigate this risk, it’s crucial for both spouses to be informed and actively involved in retirement planning decisions.
Understanding spousal rights related to retirement planning is a key step in ensuring financial security for the non-working spouse.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Pension decisions for married couples
In a traditional pension plan, a worker is typically entitled to a normal benefit, payable for their lifetime and equal to a percentage of their final pay, assuming they meet certain work and retirement age requirements. For instance, a plan might stipulate that a participant will receive 50% of their final pay for life, provided they work for 30 years and retire at age 65.
However, when the participant is married, federal law generally requires that the pension be paid as a qualified joint and survivor annuity (QJSA), unless the non-working spouse agrees to a different arrangement. A QJSA ensures that the pension continues to be paid to the surviving spouse after the participant's death, typically at a reduced rate.
For example, Joe, who retires at age 65 with a final pay of $100,000, may be entitled to a $50,000 annual benefit for his lifetime. If he chooses a QJSA with a 50% survivor benefit, he might receive $45,000 annually during his lifetime, with $22,500 continuing to his spouse, Mary, if he predeceases her. The couple may also opt for a larger survivor benefit, though this will further reduce the initial pension amount.
It's essential for both spouses to understand the implications of these choices. Selecting a QJSA may mean receiving a lower benefit during their joint lives, but it may help provide financial protection for the surviving spouse.
Spousal IRAs: An important tool for non-working spouses
A spousal IRA is another valuable tool for a non-working spouse. Even without their own earned income, the non-working spouse can contribute to an IRA, provided the couple files a joint tax return. Over time, consistent contributions to a spousal IRA can grow into a significant source of retirement income, helping to ensure financial independence.
For example, in 2024, Mary (age 45) and Mike (age 50) file a joint federal income tax return. Mary earns $100,000, while Mike stays home to care for ill parents. Mary can contribute $7,000 to her IRA (or Roth IRA), and Mike can also contribute up to $8,000 to his IRA, thanks to the spousal IRA rules. Since Mike is at least 50 years old, he is allowed the catch-up provision above the traditional IRA contribution limit.
If you file a joint federal income tax return, your contribution eligibility is based on your combined modified adjusted gross income (MAGI), allowing a non-working spouse to contribute to a traditional IRA or Roth IRA even without personal earnings, if the combined MAGI falls within the allowable income thresholds. In 2024, for married couples filing jointly, you can contribute the full $7,000 if your MAGI is below $230,000. If your MAGI is between $230,000 and $240,000, your ability to contribute or deduct is gradually reduced. If either spouse is over 50, they can contribute an additional $1,000 as a catch-up contribution, bringing the total to $8,000.
Qualified domestic relations orders (QDROs)
While everyone hopes for a lasting marriage, it's essential for both parties to consider how retirement assets will be divided in the event of divorce, especially for a spouse with little or no retirement savings. Under federal law, retirement plan benefits generally cannot be assigned to someone other than the participant, except through a qualified domestic relations order (QDRO). This legal document allows a non-working spouse to claim a portion of the participant's retirement benefits in the event of divorce.
For instance, a QDRO could allocate a portion of a 401(k) or pension plan to the non-working spouse. Given the complexities of dividing retirement benefits in divorce, particularly with defined benefit plans, it’s crucial to consult with an experienced attorney who can draft a QDRO that addresses important aspects like survivor benefits and plan subsidies during or after divorce proceedings.
How to ensure retirement income for a non-working spouse
To help ensure that your non-working spouse is financially secure in retirement, consider taking the following steps:
Review pension plan options together. Sit down as a couple and thoroughly review the pension plan options, particularly the Qualified Joint and Survivor Annuity (QJSA). Ensure both spouses understand the implications of each option and choose the one that best secures the non-working spouse’s financial future.
Establish a spousal IRA. If you’re a non-working spouse, make sure to establish and contribute to a spousal IRA (traditional or Roth, if you qualify). Even small, regular contributions can grow over time and provide an important source of retirement income, enhancing your financial independence.
Create a QDRO in the event of divorce. If divorce is a possibility, ensure that you work with an experienced attorney to draft a QDRO. This legal document will protect your rights to your spouse’s retirement benefits and ensure you receive your fair share.
Consult a financial adviser. Engage a financial adviser who will provide personalized advice and navigate complex decisions, such as pension selections, spousal IRAs and retirement income strategies.
Stay informed and involved. Regularly review your family’s financial situation, retirement accounts and plans. Attend meetings with financial advisers together to ensure both spouses are equally informed about the decisions being made. Being proactive and involved will help everyone feel secure and prepared for the future.
This could be one of the most important financial decisions you will make as a couple, and ensuring that both spouses are informed is essential for a comfortable and stress-free retirement.
Related Content
- How Retirement Plans Are Divided in Divorce
- How Finances Are Split In a Gray Divorce
- An IRA Contribution Option You Might Not Know
- Five Tips to Find Financial Harmony With Your Partner
- How Getting Married Affects Your Social Security Benefits
-
Quiz: Do You Really Know How Social Security Benefits Are Taxed?Quiz Social Security benefits often come with confusing IRS tax rules that can trip up financially savvy retirees and near-retirees.
-
Are You Ready for 65? The Medicare Initial Enrollment Period QuizQuiz Turning 65 soon? Test your basic knowledge of Medicare's Initial Enrollment Period (IEP) rules in our quick quiz.
-
3 Ways to Stretch the 2026 Social Security COLA For Your BudgetThree steps retirees can take to stretch the Social Security COLA to fit their budgets.
-
Are You Ready for 65? The Medicare Initial Enrollment Period Quiz
Quiz Turning 65 soon? Test your basic knowledge of Medicare's Initial Enrollment Period (IEP) rules in our quick quiz.
-
3 Ways to Stretch the 2026 Social Security COLA For Your Budget
Three steps retirees can take to stretch the Social Security COLA to fit their budgets.
-
Giving Tuesday Is Just the Start: An Expert Guide to Keeping Your Charitable Giving Momentum Going All YearInstead of treating charity like a year-end rush for tax breaks, consider using smart tools like DAFs and recurring grants for maximum impact all the year.
-
Uber Takes Aim at the Bottom Lines of Billboard Personal Injury LawyersUber has filed lawsuits and proposed a ballot initiative, in California, to curb settlements it claims are falsely inflated by some personal injury lawyers.
-
Dow Slides 427 Points to Open December: Stock Market TodayThe final month of 2025 begins on a negative note after stocks ended November with a startling rally.
-
6 Jimmy Buffett Lyrics Every Retiree Should Live ByNo, it's not just Parrotheads who can learn something from the legendary rocker.
-
A Financial Adviser's Health Journey Shows How the 'Pink Tax' Costs WomenFact: Women pay significantly more for health care over their lifetimes. But there are some things we can do to protect our health and our financial security.
-
I'm a Cross-Border Financial Adviser: 5 Things I Wish Americans Knew About Taxes Before Moving to PortugalMoving to Portugal might not be the clean financial break you expect due to U.S. tax obligations, foreign investment risks, lower investment yields and more.
