The Spousal IRA: the Retirement Account Every Full-Time Parent Needs
In this episode of Money Rehab with Nicole Lapin, Lapin dives into retirement planning strategies for non-working spouses. She suggests the Spousal IRA, which allows the working spouse to contribute to a retirement account on behalf of the non-working spouse. Lapin highlights the benefits of this account type, including different tax advantages and providing financial security in case of divorce.
The episode also covers how homeowners can monetize their living space through hosting on Airbnb. Lapin encourages exploring this income stream as a way to offset personal travel costs and benefit from existing assets.
This is a preview of the Shortform summary of the Jun 17, 2024 episode of the Money Rehab with Nicole Lapin
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Retirement Planning for Non-Working Spouses
A Spousal IRA, Nicole Lapin suggests, allows the working spouse to contribute to a retirement account on the non-working spouse's behalf. Spousal IRAs can be either traditional or Roth, offering different tax advantages, and have the same contribution limits as regular IRAs.
Lapin recommends including a Spousal IRA provision in prenuptial agreements to ensure equitable retirement savings. While non-working spouses may feel inadequate, a Spousal IRA reinforces retirement planning as a joint effort. It also provides financial security in case of divorce and allows both spouses control over asset distribution upon death.
Monetizing Your Home Through Airbnb
Lapin advocates hosting on Airbnb as a way to earn money from one's existing living space. She shares that Airbnb income has allowed her to offset personal travel costs and encourages homeowners to explore their property's potential Airbnb value.
1-Page Summary
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Clarifications
- A Spousal IRA provision in a prenuptial agreement is a clause that outlines how retirement savings will be handled in the event of a divorce. It allows the working spouse to contribute to a retirement account on behalf of the non-working spouse. This provision helps ensure that both spouses have a fair share of retirement savings accumulated during the marriage. Including this provision can provide clarity and protection for both parties in case of a divorce.
- Equitable retirement savings typically mean fair and just distribution of retirement funds or assets between spouses, ensuring both parties have a balanced share based on their contributions or circumstances. This concept aims to promote financial equality and security for both partners during retirement years. It can involve strategies like Spousal IRAs to help non-working spouses build their retirement savings alongside the working spouse. Equitable retirement savings are crucial for maintaining financial stability and harmony within a marriage or partnership.
- Upon death, asset distribution involves the allocation of a deceased individual's assets and possessions according to their wishes as outlined in legal documents like wills or trusts. This process ensures that the deceased's property is transferred to the intended beneficiaries or heirs. Asset distribution can be overseen by executors or trustees who manage the estate and ensure that assets are distributed in accordance with the deceased's instructions and applicable laws. It is a crucial aspect of estate planning to ensure a smooth transfer of wealth and property after one's passing.
- Monetizing a property's potential Airbnb value involves renting out part or all of your home to guests through the Airbnb platform to generate income. Homeowners can list their property on Airbnb, set pricing, and host travelers looking for short-term accommodations. By leveraging the demand for unique and local experiences, hosts can earn money by providing lodging to guests in their property. This practice allows homeowners to turn their property into a source of revenue by tapping into the sharing economy facilitated by platforms like Airbnb.
Counterarguments
- While Spousal IRAs can be beneficial, they may not be the best option for all couples, especially if the non-working spouse will have access to a different retirement plan in the future.
- The benefits of traditional versus Roth IRAs depend on current and future tax rates, which are unpredictable, so the choice between them may not be clear-cut.
- Including a Spousal IRA provision in a prenuptial agreement might not be necessary or beneficial for all couples, depending on their financial situation and state laws.
- A Spousal IRA does not guarantee financial security in case of divorce, as the division of assets is subject to legal proceedings and agreements.
- While a Spousal IRA allows for control over asset distribution upon death, it's important to consider other estate planning tools that might be more appropriate depending on the couple's financial situation.
- Hosting on Airbnb requires significant time and effort to manage and may not be suitable for everyone, especially those who value their privacy or cannot frequently accommodate guests.
- Airbnb income can be inconsistent and may not be a reliable source of income to offset personal travel costs or contribute significantly to household income.
- The potential Airbnb value of a property may be overestimated, and homeowners should consider the costs of hosting, such as additional insurance, taxes, and wear and tear on the home.
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Retirement planning for non-working spouses
Retirement planning is a critical aspect of financial security, and for non-working spouses, Spousal IRAs provide a valuable tool for ensuring their retirement savings.
Spousal IRAs provide a retirement savings option for non-working spouses
Spousal IRAs allow the working spouse to contribute to a retirement account on behalf of the non-working spouse
A Spousal IRA allows the working spouse to make contributions on behalf of a nonworking spouse, which is an excellent option for couples where one spouse may not have an income. The working spouse's earned income must be enough to cover both their contribution and that of the Spousal IRA.
Nicole Lapin, a financial expert, suggests that couples include provisions for a Spousal IRA within a prenuptial agreement. This clause should state that the working spouse agrees to regularly contribute to the Spousal IRA for the benefit of the non-working spouse, ensuring equitable retirement savings.
Spousal IRAs can be set up as either traditional or Roth IRAs, offering different tax advantages
Spousal IRAs offer flexibility in choosing between a traditional IRA, where contributions grow tax-deferred, or a Roth IRA, where contributions grow tax-free and qualified withdrawals can also be made tax-free.
Spousal IRAs have the same contribution limits as regular IRAs, including catch-up contributions for those over 50
In 2024, anyone with a Spousal IRA under the age of 50 can contribute up to $7,000, and for those over 50, an additional $1,000 catch-up contribution is permitted, making the limit $8,000. This arrangement doubles the opportunity for tax-advantaged growth, from $7,000 for an individual to $14,000 for the couple across both IRAs.
Emotional and practical considerations around spousal IRAs
Non-working spouses might sometimes feel inadequate due to not contributing financially, but establishing a Spousal IRA is a collective investment in the future well-being of both spouses.
Non-working spouses may feel guilty or inadequate about not contributing, but the spousal IRA allows them to build their own retireme ...
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Retirement planning for non-working spouses
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Clarifications
- Spousal IRAs are retirement accounts that allow a working spouse to contribute on behalf of a non-working spouse. This option helps non-working spouses save for retirement even if they don't have earned income. Spousal IRAs can be set up as traditional or Roth IRAs, offering different tax advantages. They have the same contribution limits as regular IRAs, providing an opportunity for tax-advantaged growth for couples.
- Spousal IRAs have the same contribution limits as regular IRAs. In 2024, individuals under 50 can contribute up to $7,000, while those over 50 can make an additional catch-up contribution of $1,000, raising the limit to $8,000. This allows couples to potentially contribute up to $14,000 across both IRAs, providing enhanced retirement savings opportunities.
- Nicole Lapin suggests including provisions for Spousal IRAs in prenuptial agreements to ensure that the working spouse commits to contributing to the non-working spouse's retirement savings. This clause establishes a formal agreement within the marriage contract, outlining the financial responsibilities and commitments regarding retirement planning. By incorporating Spousal IRA provisions in a prenuptial agreement, couples can proactively address and solidify their retirement savings strategy, promoting financial transparency and security within the relationship. This approach can help set clear expectations and provide a structured framework for equitable retirement planning between spouses.
- Contributions to a traditional Spousal IRA are typically tax-deductible, potentially lowering the couple's taxable income in the contribution year. On the other hand, Roth Spousal IRA contributions are made with after-tax dollars, but qualified withdrawals in retiremen ...
Counterarguments
- Spousal IRAs, while beneficial, may not be the best option for all couples, especially if the working spouse does not have sufficient income to maximize contributions to both IRAs.
- Including Spousal IRA provisions in a prenuptial agreement might not be necessary or appropriate for all couples, depending on their financial situation and personal views on prenuptial agreements.
- The choice between a traditional or Roth IRA depends on individual circumstances, and the tax advantages may not be as beneficial for some, depending on their current and future tax brackets.
- The contribution limits for Spousal IRAs, although equal to regular IRAs, may not be sufficient for a non-working spouse's retirement needs, especially if they have been out of the workforce for a significant period.
- While Spousal IRAs are intended as a collective investment, they may not fully address the potential financial vulnerability of non-working spouses, who may lack their own pension or Social Security benefits.
- Building retirement savings through a Spousal IRA does not address the potential n ...
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Monetizing your home through Airbnb
Nicole Lapin advocates for the use of Airbnb hosting as an effective way to monetize an existing living space and offset personal travel costs.
Hosting on Airbnb allows you to earn money from your existing living space
Lapin emphasizes that by hosting on Airbnb, homeowners can transform their residence into a source of income. She regards this as one of her favorite side hustles, especially praising how it leverages what one already owns.
Hosting on Airbnb can offset the costs of your own travel and vacations
Sharing her personal experience, Lapin reveals that the income earned from hosting on Airbnb has allowed her to indulge in vacations guilt-free. The guests' payments help finance her travels, creating a beneficial situation both for her finances and for travelers needing accommodation. ...
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Monetizing your home through Airbnb
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Clarifications
- A side hustle is a secondary job or gig that individuals take on in addition to their primary source of income. It is typically something flexible that can be done alongside a full-time job to earn extra money or pursue a passion. Side hustles can range from freelance work and online businesses to part-time jobs or creative endeavors. They provide an opportunity to diversify income streams and explore new interests outside of one's main career.
- "Leveraging what one already owns" in the context of Airbnb hosting means utilizing your existing living space, which you already possess, to generate income. It involves making use of your property or assets without significant additional investment to create a new revenue stream. This concept emphasizes maximizing the value of what you already have, such as your home, to benefit financially. By leveraging existing resources like your property, you can tap into opportunities for earning money without the need for substantial upfront costs.
- "Indulge in vacations guilt-free" means being able to enjoy vacations without feeling guilty about spending money on them. In this context, it suggests that the income earned from hosting on Airbnb covers the costs of vacations, allowing the person to travel without financial worry. This phrase highlights the financial freedom and pe ...
Counterarguments
- Hosting on Airbnb requires time and effort to manage listings, communicate with guests, and maintain the property.
- Not all homes are suitable for Airbnb due to location, local regulations, or lack of demand.
- There are potential risks involved with hosting strangers, such as property damage or liability issues.
- Income from Airbnb is not guaranteed and can fluctuate based on seasonality and competition.
- Hosting on Airbnb can lead to increased wear and tear on your home, leading to higher maintenance costs.
- Some neighbors and communities may be opposed to short-term rentals, leading to conflicts or even restrictions being put in place.
- Using your home for Airbnb may have tax implications that can affect the overall profitability of this side hustle.
- The valuation of ...
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