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Re: Re: Re: Retirement Plan for Spouse

It's not uncommon for a dentist or physician with a practice to employ their spouse, and have the spouse participate in the practice's retirement plan.

If you're not self-employed, there needs to be a business purpose to employ a spouse. A mother caring for a child probably doesn't qualify. Perhaps you can pay her as your personal assistant, but you would have to be able to substantiate a true business purpose if the IRS ever asked.

Plus, there are taxes you will end up paying. Even though she will contribute most of her salary into a SIMPLE, you'll still need to withhold social security and Medicare taxes from what you pay her, and then, match that amount. Those taxes equal 15.3% of her pay. On $12k of salary, you're looking at an extra $2k of taxes. Add to that unemployment taxes and workers comp insurance, plus the cost of processing the payroll, and you're quickly to $3k of additional costs.

Consider investing that money in a 529 Plan for your child, which grow tax free thanks to a 2006 tax law change, or purchasing tax efficient mutual funds or other investments within a non-retirement account.

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