Should a Stay at Home Parent Open a Roth IRA?

June 18, 2023

In this highlight, we discuss what Roth IRA options are out there for stay at home parents.

For more of a deep dive, check out our free resources here.


Let’s move on to Josue’s question. He says, “Should I open a Roth IRA for a stay-at-home parent, and how does that work?”

Yeah, the reason we love Roth IRAs is because that money is tax-free. It is so beautiful. You put money in there, it grows tax-deferred. So long as you meet certain qualifications, like the account has been open for five years and you’re over 59 and a half, you get to pull that money out tax-free. You build a million dollars in a Roth IRA, you are truly a millionaire. That’s nice. You build a million dollars in a pre-tax account, you’re kind of a millionaire, you know, less of taxes, right? So, it’s a really, really exciting account.

It’s so good, though, the government says not everybody can do this. Once you make over a certain income, if you’re a single person, if you make over this much, if you’re a married person filing jointly, make over this much, you can’t do Roth IRAs anymore. So, it’s fairly limited. That’s how you know the government knows that it’s good because they don’t want to let you put too much money into it.

One of the requirements to have a Roth IRA is you have to have earned income. You have to have a W-2 or a 1099. You have to be out there working, earning income, so that you can contribute to Roth. Here lies Josue’s question, right? So, if you have a stay-at-home parent, are they just out of luck? Yeah, my spouse doesn’t have any earned income. What am I to do?

Here’s what’s great: you can actually do what’s called a spousal IRA contribution so long as the household income you’re showing is large enough for both spouses to contribute. So, this year it’s $6,500. $6,500 times 2 is $13,000. So long as you have at least thirteen thousand dollars, as either spouse has thirteen thousand dollars of earned income, the working spouse can max out their Roth IRA, and then the stay-at-home spouse can also max out their Roth IRA. It is a fantastic planning opportunity to allow you to get additional tax savings in place.

Now, even if you’re someone who’s over the income limit, you can do the same thing if you’re someone perpetrating the backdoor Roth IRA strategy. I do a non-deductible traditional IRA contribution, and then I want to convert… Brian’s calling me right now. Does he not know? That’s the best thing to come in all day.

If you’re doing the backdoor Roth contribution strategy, you can do a non-deductible traditional IRA contribution, and then you can convert that to Roth tax-free. Well, you can even do that for your spouse if your spouse is not working. I don’t want to blanket say, “Josue, yes, absolutely fund a Roth for your spouse,” because what I want you to do first is I want you to follow the Financial Order of Operations. If you are following it and you’ve covered your deductibles, you’re getting your employer match, you don’t have high-interest debt, your emergency fund is built, and you are now on step five and you’re putting money into your Roth, yes, absolutely, by all means, I think putting money into a Roth for a stay-at-home spouse is an amazing idea, an amazing strategy, and a great way for a household to save more tax-free dollars. Great answer and great question. Thanks so much for that one.



Most Recent Episodes

What I Learned From Being BROKE!!! (And Why I Wouldn’t Change It)

No one disputes the fact that being broke isn’t great. We want to spread the word that no matter where you came from, you can build wealth. In this episode, Brian and Bo share personal stories about their journey to wealth and lessons they learned along the way....

Top 10 Mind-Blowing Money Stats (2023 Edition)

These 10 money stats will blow your mind! We’ll discuss the unbelievable amount of money Americans save, when most reach millionaire status, and how many Americans carry a credit card balance. Research and resources from this episode: Most Americans don't have enough...

Wealth Multiplier Revealed: The Magic of Compound Interest!

There’s a reason why Albert Einstein called compounding interest the eighth wonder of the world! Do you know exactly how it works and how much your dollars could turn into by retirement? The Money Guy Wealth Multiplier can show anyone just how powerful every dollar...

From $0 to Millionaire in 10 Years (Is it Possible?)

How can you become a millionaire in 10 years or less? We’ll discuss common ways we see millionaires build wealth quickly, including through real estate, entrepreneurship, and the stock market. Discover how real wealth is built and why building wealth quickly may not...

Financial Advisors React to INFURIATING Money Advice on TikTok!

Brian and Bo are BACK to react to some more TERRIBLE financial TikTok advice! Join us as we take a look at some of the worst financial advice on the platform and tell you what to actually focus on in your own financial life. Enjoy the Show? Sign up for the Financial...

Investing Showdown: Dollar Cost Averaging vs. Lump Sum!

It’s a debate as old as time: what’s better, dollar cost averaging or lump sum investing? In this episode, we’ll cover the nuances and pros and cons of both, including in-depth case studies comparing investors at different times. Research and resources from this...

Is Inflation Really Ruining Your Finances? (You Won’t Like the Answer)

Inflation has changed our daily living expenses dramatically over the last few years. While we can’t control all of our expenses, there are many things in your control that can help you become a Financial Mutant and build wealth better than your peers. Enjoy the Show?...

Are $1,000 Car Payments Becoming the New Norm?!

New data shows more Americans than ever have car payments over $1,000. Is this becoming the new normal? How much could having a car payment of $1,000 be costing you for retirement? For more information, check out our Car Buying Checklist!