How Getting Married Affects Your Roth IRA: 5 Surprising Financial Impacts

Marriage is more than a union of hearts; it's also a merger of finances that can directly influence your long-term retirement plans. If you own a Roth IRA or are planning to open one, tying the knot can bring unexpected changes to contribution limits, income eligibility, and tax advantages. Whether you're already investing or just getting started, understanding how getting married affects your Roth IRA can help you make the most of your financial future.

Understanding Roth IRAs: A Quick Overview

Before diving into marriage-specific impacts, let’s briefly cover what a Roth IRA is. A Roth IRA (Individual Retirement Account) is a retirement savings account that offers tax-free growth and tax-free withdrawals during retirement. Contributions are made with after-tax dollars, meaning you don’t get a tax deduction upfront, but qualified withdrawals, including earnings, are tax-free.

Key features include:

• Contribution Limits: $6,500 annually (or $7,500 if you're 50 or older) in 2023.
• Income Limits: Contributions phase out as your income increases.
• Tax-Free Withdrawals: Available after age 59½ if the account has been open for five years.

Marriage can alter these dynamics in several ways.

The Effect of Combined Income on Roth IRA Eligibility

When you're single, your Roth IRA eligibility is based solely on your individual income. However, marriage brings joint finances into the equation, which can push your Modified Adjusted Gross Income (MAGI) above the threshold for Roth IRA contributions.

For 2023, Roth IRA income limits are:

• Single Filers: $138,000–$153,000 (phase-out range)
• Married Filing Jointly: $218,000–$228,000

If your combined income exceeds the upper limit, you can no longer contribute directly to a Roth IRA.

Strategies to Stay Eligible:

• Backdoor Roth IRA: Contribute to a traditional IRA and then convert it to a Roth IRA.
• Spousal IRA Contributions: If one spouse earns significantly less, they can still contribute via spousal IRAs.
• Income-Shifting Strategies: Consider deferring income or increasing pre-tax deductions to lower your MAGI.

Marriage and the Contribution Limit: Doubling Up

Marriage can be advantageous for Roth IRA contributions if both spouses have earned income. As a couple, you can contribute up to $13,000 ($6,500 each in 2023) or $15,000 if you're both over 50.

Spousal IRAs for Non-Working Partners

If one spouse doesn’t work or earns minimal income, the working spouse can contribute to a spousal IRA on their behalf. This strategy allows couples to maximize their retirement savings even if only one partner is employed.

Example:

• Scenario 1 (Single): Max contribution: $6,500.
• Scenario 2 (Married, one spouse earns): Max contribution: $13,000 (spousal contributions included).

This setup can supercharge your retirement savings as a couple.

Tax Filing Status: Married Filing Jointly vs. Separately

Your tax filing status as a married couple plays a significant role in Roth IRA rules. Most couples file jointly, which provides a higher income threshold for Roth contributions. However, filing separately imposes stricter limits.

For example:

• Married Filing Separately: Roth IRA contributions phase out between $0 and $10,000 MAGI.
• Married Filing Jointly: Roth IRA phase-out starts at $218,000 MAGI.

When Filing Separately Makes Sense

Filing separately is generally not advisable for Roth IRA contributions unless there are unique financial circumstances, such as liability protection or distinct income sources.

Roth IRA Withdrawal Rules After Marriage

Marriage doesn’t directly change Roth IRA withdrawal rules, but it can affect your withdrawal strategy. Couples often pool resources to optimize retirement income, making it crucial to align on the timing and purpose of Roth IRA withdrawals.

Key Considerations:

• Tax-Free Growth: Always prioritize keeping funds in your Roth IRA for as long as possible.
• Emergency Funds: Married couples might rely on one partner's Roth IRA for emergency withdrawals.
• Inherited Roth IRAs: If one spouse inherits the other's Roth IRA, special rules apply regarding distributions.

Marriage and Roth IRA Conversions

If your combined income makes you ineligible for direct Roth IRA contributions, Roth IRA conversions can be a useful workaround.

Benefits of Roth IRA Conversions for Married Couples:

1. Avoid MAGI Restrictions: Contribute to a traditional IRA and then convert to a Roth.
2. Tax Diversification: Conversions allow you to balance pre-tax and post-tax accounts.
3. Future Tax Planning: Reduces required minimum distributions (RMDs) in traditional IRAs.

Timing the Conversion:

Married couples should coordinate conversions during years of lower income or take advantage of tax deductions to minimize conversion taxes.

Impact on Retirement Planning Goals

Marriage changes the way you plan for retirement overall. With two Roth IRAs, you can double your tax-free retirement income potential.

Consider These Retirement Goals Together:

• Account Diversification: Utilize both pre-tax (401(k)) and post-tax (Roth IRA) accounts.
• Legacy Planning: Roth IRAs offer flexible inheritance options.
• Early Retirement: If one partner plans to retire early, the other’s Roth IRA can supplement income.

Common Mistakes Married Couples Make With Roth IRAs

1. Ignoring MAGI Limits:

Failing to track income could lead to excess contributions, which incur penalties.

2. Not Maximizing Spousal Contributions:

Many couples miss out on the opportunity to contribute to spousal IRAs.

3. Overlooking Tax Implications of Conversions:

Conversions can push you into a higher tax bracket if not planned properly.

4. Forgetting RMD Coordination for Inherited IRAs:

Inherited Roth IRAs follow different distribution rules depending on whether the inheritor is a spouse.

FAQs

What happens to my Roth IRA if I get married?
Marriage affects your Roth IRA through combined income limits, contribution strategies, and tax filing status.

Can we both contribute to a Roth IRA if we’re married?
Yes, as long as your joint MAGI is below the income threshold, both spouses can contribute.

How does filing separately impact Roth IRA contributions?
Filing separately significantly lowers the MAGI limit for Roth contributions, making it harder to qualify.

Can my spouse inherit my Roth IRA?
Yes, spouses can inherit Roth IRAs and have options for rolling over the account or keeping it as an inherited Roth IRA.

Should we consider Roth conversions as a couple?
Roth conversions can be beneficial if done strategically, especially in years with lower taxable income.

Can one spouse contribute to the other’s Roth IRA?
Yes, a working spouse can contribute to a spousal IRA for a non-working partner.

Conclusion

Getting married introduces new financial complexities, but it also unlocks unique opportunities for maximizing your retirement savings. By understanding how marriage affects your Roth IRA—whether through income limits, contribution strategies, or tax planning—you and your partner can create a robust retirement plan tailored to your shared goals.

Be proactive about aligning your Roth IRA contributions and withdrawal strategies with your marriage's financial blueprint, and you’ll be well-positioned for a secure, tax-free retirement together.