Why women need an IRA of their own
Photo credit: Mark Hooper
There is, in the tax code, a provision for something called a Spousal IRA. This is essentially an IRA just like the IRA a working person has. You can fund it every year, and you can take a deduction on your income taxes for doing so. There are a few limitations. Your spouse has to earn enough to cover both his own and your retirement contributions. You and he have to file your taxes jointly. And your ability to make contributions phases out once you reach an adjusted gross income of $160,000. But—as you'll see below—a spousal IRA can add up very quickly and go a long way toward securing your retirement.

Let's say you decide you're going to stay home and raise your children from the time they're born to the time they go to college. You have two kids, two years apart, so that's a 20-year time frame. In every one of those years you contribute the maximum (currently $4,000, $5,000 if you're 50 or over) to a spousal IRA. Afterward, you don't make additional contributions [because you're back at work and into a 401(k)], but you don't touch the money until you retire. Here's what that picture looks like.

Making Contributions of $4,000 a Year, 8 Percent Growth
After 5 years: $29,566
After 10 years: $67,656
After 20 years: $208,951

Contributions Stop, Growth Continues
After 30 years: $463,796
After 40 years: $1,029,460

An IRA of Your Own continues...