IRA Accounts

IRA Accounts: Can You Have Multiple IRA Accounts?

You most certainly can! The IRS does permit multiple IRA accounts. This could be several Roth IRAs or several Traditional IRAs. Before making a decision, you should be aware of the advantages and disadvantages of owning multiple IRAs.

Why You Should Plan For Retirement

IRA Accounts

According to a recent study, nearly half of all Americans have no retirement savings. Nothing. Nada. There is nothing.

This is a major issue because social security only replaces about 40% of your pre-retirement income, and you’re expected to live in retirement for 20-30 years. That leaves a 60-70% income gap to fill, and the only way to do so is to save on your own.

While 401(k) plans are another option (if your employer provides them) and a great way to save, they have limitations. In comparison to Roth IRAs, 401ks:

Have fewer investment options – Most 401k plans only provide mutual funds or exchange-traded funds (ETFs) (Exchange Traded Funds). In comparison to Roth IRAs, which allow you to invest in individual stocks, real estate, and even cryptocurrency.

Vesting schedules may apply – Your employer may require you to work for a certain number of years before you fully vest in the company 401k plan. Cliff vesting (you are fully vested after a certain number of years) and graded vesting (you partially vest after a certain number of years) are two types of vesting schedules.

What is an Individual Retirement Account (IRA)?

An Individual Retirement Account (IRA) is a personal savings plan that provides tax benefits to assist you in saving for retirement. Traditional and Roth IRAs are the two types of IRAs.

Contributions to a Traditional IRA are made with money that you are able to deduct from your taxes right now. Your earnings will then grow tax-deferred until you withdraw them in retirement when they will be taxed as ordinary income. Contributions to a Roth IRA are made after-tax dollars. Your earnings will then grow tax-free, and you will be able to take tax-free withdrawals in retirement.

The best IRA for you determines by your circumstances and should discuss with a financial advisor.

How Many IRA Accounts Can You Have?

The IRS does permit multiple IRA accounts. The number of IRA accounts you can have is unlimite, but there are contribution limits. The IRA contribution limit for 2022 is $6,000. If you are 50 or older, you can make an additional $1,000 catch-up contribution, for a total of $7,000.The following are the 2022 IRA income limits.

Personal Experience with Multiple IRAs

When I first began working as a financial advisor, I was a W-2 employee with access to a 401k with a nice match. I wasn’t making a lot of money, but I was living well below my means and was able to put money into a 401k and a Roth IRA.

I left after 5 years and continue to contribute to my Roth IRA. Instead of leaving my 401k with my previous employer, I decided to start a 401k rollover.

At the same time, I became self-employed and was able to establish a business retirement plan, also known as an employer-sponsored retirement plan. Among my options were.

  • Simple IRAs are retirement plans designed for small businesses with 100 or fewer employees. Employers must either contribute a fixed percentage of each employee’s pay (2% to 3%) or match employee contributions up to 3%.
  • SEP IRA (Simplified Employee Pension) – a retirement plan that is set up by any size business. The employer makes a contribution to each eligible employee’s SEP-IRA based on a percentage of their salary or compensation, up to a maximum of 25%.
  • Solo 401k – A retirement plan for self-employed people and their spouses. The employer (you) can contribute up to $20,500 of your salary in 2022 ($27,000 if you’re 50 or older).
  • Traditional 401k – This is an employer-sponsored retirement plan. Contributions are made before taxes and grow tax-free. Retirement withdrawals taxs as ordinary income.
  • I could use any of the above options, as well as a traditional or Roth IRA.

I chose the SEP-IRA because it was the most straightforward and adaptable option for my company. I could contribute 25% of my annual income up to the $61,000 contribution limit for 2022. And because I didn’t have any employees at the time, I didn’t have to contribute money on their behalf.

The Advantages of Having Multiple IRA Accounts

1. More insurance for your cash and investments:

If the brokerage or bank where your IRA is held fails, SIPC and FDIC insurance on investment and deposit accounts can cover your losses. Coverage for a single account holder at a single institution is generally capped at $500,000 (SIPC) and $250,000 (FDIC), but there are ways to increase your coverage through multiple accounts. For example, if you have two Roth IRAs at the same SIPC-insured institution, your coverage is limited to $500,000 per account. However, if you have both a Roth and a traditional IRA at the same institution, each account considers a separate insurance entity with $500,000 SIPC coverage.

2. You feel more secure not putting all of your “eggs in one basket.”

Aside from FDIC or SIPC insurance, you may simply feel safer spreading your retirement assets across two or three accounts rather than a single account. Even if your funds are insured, the thought of a bank or broker failing can unsettling when it comes to something as important as your retirement savings.

3. Tax diversification

Different types of IRAs offer various tax breaks. A traditional IRA provides an immediate tax deduction, allowing you to defer paying taxes until you begin withdrawing funds from the account in retirement. There is no tax break on contributions to a Roth IRA, but qualified withdrawals are tax-free. Here’s an in-depth look at the differences between traditional and Roth IRAs.

4. There are various types of IRA accounts.

In addition to differences in how your savings tax, traditional and Roth IRAs have different withdrawal rules both before and during retirement. Contributions to a Roth IRA (not earnings) can be withdrawn tax-free and penalty-free at any time and for any reason. Traditional IRAs provide less flexibility, though they do permit early withdrawals (before the age of 5912) without penalty in certain circumstances. Moreover, unlike Roth, withdrawals from a traditional IRA are required after the age of 72. The Roth has no required minimum withdrawals.

5. Different IRAs for various retirement goals.

If the brokerage or bank where your IRA is held fails, SIPC and FDIC insurance on investment and deposit accounts can cover your losses. Coverage for a single account holder at a single institution is generally capped at $500,000 (SIPC) and $250,000 (FDIC), but there are ways to increase your coverage through multiple accounts. For example, if you have two Roth IRAs at the same SIPC-insured institution, your coverage is limited to $500,000 per account. However, if you have both a Roth and a traditional IRA at the same institution, each account considers a separate insurance entity with $500,000 SIPC coverage.

6. Accounts that are managed versus accounts that are self-directed

Many people are hybrid investors, meaning they prefer to have the majority of their money managed professionally but still want to dabble in do-it-yourself investing. An investor of this type may have the majority of their assets in a managed account, such as Betterment or M1 Finance, or in a DIY account set up through TD Ameritrade. It’s great to have options.

The Drawbacks of Having Multiple IRAs (Roth or Traditional)

Despite the benefits of having multiple IRA accounts, it is possible to have too much of a good thing.

Here’s where having multiple IRA accounts can backfire:

1. Difficult to Control

It can be difficult to effectively manage multiple IRA accounts unless you invest money on a full-time basis. If you have multiple taxable investment accounts, the situation will exacerbate. You may find yourself doing particularly well on some accounts while doing very poorly on others and possibly losing money on others.

2. Fees for IRA Custodianship

If you have five IRA accounts, each with a $100 annual fee, your fees will total $500 per year, rather than $100 per year with a single account. That’s an additional $400 per year. That adds up over 20 or 30 years and eats away at your investment returns.

3. Inconsistent Diversification

Creating and maintaining a consistent investment allocation in a single account can be difficult enough. But juggling four or five at once can be a complete nightmare.

Consider how difficult that becomes when attempting to rebalance your accounts. Most likely, your IRA account mix looks more like a little bit of this and a little bit of that than a well-balanced investment portfolio.

4. Tracking Problems

If you have multiple IRA accounts, it may be difficult to know how much money you have saved for retirement at any given time. Will you be able to tell if you’re on track with your retirement savings? You’ll have to do a calculation every time you want to find out.

And what if the market falls dramatically? How will you know how much damage has done to all of your accounts collectively? Aside from being a math problem, such complications can make rational investment decisions difficult.

You Might Have an Estate Planning Nightmare

If you do decide to open multiple IRAs, keep good records and consult with a tax advisor to ensure you’re taking advantage of all available tax benefits and aren’t liable for unrealized tax liabilities.

Additionally, RMDs (required minimum distributions) must be managed across all retirement accounts and financial institutions.

Reduce the number of IRA accounts you have to a manageable number.

For specific reasons, having a limited number of multiple IRA accounts may make sense. A married couple with a traditional and a Roth IRA each would certainly justify the couple having four IRA accounts. You can also make a case for both a managed account and a truly self-directed account.

However, if you have multiple IRA accounts primarily for passive accumulation (taking advantage of promotions or 401(k) rollovers), you’ve likely created a web of complications for yourself with no real benefit.

Limit your IRA accounts to no more than two or three per spouse, and only for the most compelling reasons. Then, combine.


What’s the right number of IRAs?

For most people, the number is at least two: Both a Roth and traditional IRA, in addition to a workplace retirement plan like a 401(k), if you’ve got one. Here’s why:

What is the optimal number of IRAs?

For the majority of people, the answer is at least two: A Roth and traditional IRA, as well as a workplace retirement plan such as a 401(k), if you have one. This is why:

The Roth IRA offers the most flexibility both before and after retirement (tax and penalty-free withdrawals of contributions) (tax-free distributions and no required minimum withdrawals). It’s well worth having a Roth IRA if you qualify to contribute to one. The current Roth limits are listed below.

A traditional IRA is a good option if you have money from old workplace retirement plans or if the tax deduction encourages you to save more.

Is it Possible to Have More Than One Roth IRA?

You can have multiple Roth IRAs and open multiple Roth IRAs at any time. You can have an unlimited number of Roth IRA accounts. However, regardless of how many Roth IRAs you have, your total contributions cannot exceed the government’s limits.

Is it advisable to have multiple IRAs?

If you are married and each spouse has a Roth and traditional IRA, it can be beneficial to have multiple IRAs. It’s also a good idea to have one managed and one self-directed account. It may be difficult to keep track of and diversify your retirement portfolio if you have more than two or three IRAs.

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