For Mark Roberts’ Use: As with other social issues during election season, the wage disparity between men and women has been a big topic in the news this year. Statistics say that women earn less money than men, so it probably doesn’t surprise you to hear that retirement savings differ as well. In 2014, a study by the Employee Benefit Research Institute uncovered a significant gap in the savings of men and women.
The average IRA balance among men was calculated at $139,467, while women have saved an average of $81,700. Where retirement savings are concerned, men are ahead of women by $57,767.
Of course, we also know that women tend to take time off from their careers due to family obligations. We’re beginning to see a reversal in that trend, with some women becoming the primary breadwinners while the men stay home, but that scenario is less common. Either way, it’s understandable that when your career is on hold, you might also put retirement savings on hold.
This could be a tricky situation for the non-working spouse, as they not only lose time saving for retirement, but might face lower wages and reduced savings ability upon reentering the workforce later. If a divorce should occur in the future, the spouse who sacrificed their career to care for the family might find himself or herself lacking in retirement savings too.
A spousal IRA offers the perfect opportunity for the women (and men) in this situation. The working spouse is able to set aside retirement funds for the non-working spouse, while enjoying the same tax benefits included with any IRA plan. Naturally, we hope that the couple enjoys a long-lasting and happy marriage. In that case the couple has simply found another way to boost their joint retirement savings. However, if a divorce should occur, one spouse is not left unprepared for retirement.
As with any other retirement savings vehicle, a spousal IRA is subject to some complicated rules and procedures. Talk with your financial planner about the benefits and tax guidelines of funding this type of retirement plan.
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