As I've said time and time again, if you're not participating in a 401(k) where matching dollars are being offered by your employer, you're leaving free money on the table. And for all you married ladies out there, once you've discovered the allure, the freedom, the feeling of self-worth that goes along with having a bank account of your own, you're going to want to take the next step. You're going to want a retirement account of your own. If you're not in the workforce and believe you're not entitled to a retirement account of your own, you are mistaken.
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...
Reprinted from Make Money, Not Excuses by Jean Chatzky with permission from Crown Business, a division of Random House, Inc. Copyright © 2006 by Jean Chatzky.
Please note: This is general information and is not intended to be legal advice. You should consult with your own financial advisor before making any major financial decisions, including investments or changes to your portfolio, and a qualified legal professional before executing any legal documents or taking any legal action. Harpo Productions, Inc., OWN: Oprah Winfrey Network, Discovery Communications LLC and their affiliated companies and entities are not responsible for any losses, damages or claims that may result from your financial or legal decisions.


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