<p>As we have discussed at length, there are a few individual retirement accounts (IRAs) that you can contribute to for your retirement savings. However, there are two more accounts that we need to review: custodial and spousal! These two IRAs are for your children and a spouse with no income.</p><p class="button-wrapper"><a class="button primary" href="https://beansandbucks.substack.com/subscribe"><span>Subscribe now</span></a></p><div class="captioned-image-container"><figure><a class="image-link image2 is-viewable-img" href="https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Feb106018-afe0-4405-85d0-f0c4167488ea_1125x750.jpeg" target="_blank"><div class="image2-inset"><source type="image/webp" /><img alt="Free Wooden Family Dolls on Cash Stock Photo" class="sizing-normal" height="750" src="https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Feb106018-afe0-4405-85d0-f0c4167488ea_1125x750.jpeg" title="Free Wooden Family Dolls on Cash Stock Photo" width="1125" /><div class="image-link-expand"><div class="pencraft pc-display-flex pc-gap-8 pc-reset"><div class="pencraft pc-reset icon-container restack-image"><svg class="lucide lucide-refresh-cw" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><path d="M3 12a9 9 0 0 1 9-9 9.75 9.75 0 0 1 6.74 2.74L21 8"></path><path d="M21 3v5h-5"></path><path d="M21 12a9 9 0 0 1-9 9 9.75 9.75 0 0 1-6.74-2.74L3 16"></path><path d="M8 16H3v5"></path></svg></div><div class="pencraft pc-reset icon-container view-image"><svg class="lucide lucide-maximize2" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><polyline points="15 3 21 3 21 9"></polyline><polyline points="9 21 3 21 3 15"></polyline><line x1="21" x2="14" y1="3" y2="10"></line><line x1="3" x2="10" y1="21" y2="14"></line></svg></div></div></div></div></a></figure></div><p><strong>Custodial IRAs</strong></p><p>Custodial IRAs are simply, IRAs that are held by a custodian for minor that has earned income until the child reaches age 18. This allows a parent to open an IRA for a younger child and start contributing to their retirement as early as possible! The catch, if you want to call it that, is that in order to contribute to ANY IRA, you need earned income. This restriction still holds true for custodial IRAs where the child would need earned income. There are some cases where baby models can have “earned income”, but trying to skirt that rule with the IRS, is not generally worth it.</p><p>However, a paper route, raking leaves, shoveling snow or locking up at the local church are all instances of earned income. While a W2 would be best in the eyes of the IRS, a detailed record of work performed, when, for who, for how long, and what was paid is enough evidence to prove earned income. At this point, you would be able to contribute into your child’s IRA up to the yearly maximum ($7,000 in 2024) OR 100% of their earned income.</p><p>What this means is that if your child makes $2,000 throughout the course of the year (that is recorded and acceptable work) only $2,000 max can be contributed into the IRA. Custodial IRAs are a GREAT way to jumpstart your children’s retirement savings. They are hardly ever used or talked about and reaching $50,000 by 18 is certainly not out of the question with 5 years of maxing and investment gains.</p><p><strong>Spousal IRAs</strong></p><p>Spousal IRAs are also pretty self-explanatory in that they are IRAs that can be opened for a spouse. As we mentioned above and previously, you need EARNED income in order to contribute to an IRA. There are many cases where a spouse is out of work: illness, general unemployment, a stay-at-home parent or even just a spouse who does not NEED to work if the other makes enough to support their lifestyle. It is in these cases that a spousal IRA can be beneficial to get more funds into tax-advantaged retirement accounts, even without earned income.</p><p>To qualify to open a spousal IRA, taxes need to be filed jointly and obviously adhere to the normal contribution limits. Again, the total you can contribute to an IRA in 2024 is $7,000. With a spousal IRA, even though there is only one stream of income, a married couple can still reap the benefits of tax-advantaged retirement accounts and contribute the full $14,000 between them both!</p><p>These are two important retirement accounts as you move forward in your financial journey. Setting up your children for life with a custodial IRA or having the ability to retire your spouse and STILL max contribute to IRAs is nothing short of magic. Utilize it!</p><p class="button-wrapper"><a class="button primary" href="https://beansandbucks.substack.com/subscribe"><span>Subscribe now</span></a></p><p>Thank you for reading, liking, subscribing and restacking and I will be back Monday with the market recap as usual!</p><p>Prosperously,</p><p>Jim</p>