The products listed here, many or all of them, are from our partners, who pay us. This affects the products we write about as well as the location and arrangement of the products on a page. However, this does not influence our evaluations. Our opinions are our own. This is our revenue model and a list of our partners.
This page’s investment information is solely meant to be educational. NerdWallet, Inc. does not recommend or advise investors to purchase or sell specific stocks, securities, or other investments, nor does it provide advisory or brokerage services.
These are the benefits and drawbacks of having more than one IRA.
Maximizing Your Savings with Multiple IRAs
When it comes to retirement planning, individual retirement accounts (IRAs) are a powerful tool for building a nest egg. But did you know that you can have more than one IRA? In fact, there’s no limit to the number of IRAs you can have, allowing you to combine the tax advantages of both traditional and Roth IRAs, or even open more than one of the same type of account.
This article will delve into the world of multiple IRAs, exploring the benefits and drawbacks, as well as strategies for maximizing your retirement savings with this approach.
Benefits of Having Multiple IRAs
There are several compelling reasons to consider having more than one IRA:
- Tax Diversification: Traditional and Roth IRAs offer different tax benefits. Traditional IRAs provide an immediate tax deduction on contributions, allowing you to postpone paying taxes until you withdraw the money in retirement. Roth IRAs, on the other hand, offer tax-free withdrawals in retirement, but contributions aren’t tax-deductible. By having both types of IRAs, you can strategically allocate your contributions to minimize your overall tax burden.
- Investment Diversification: Having IRAs at multiple financial institutions can give you access to a wider range of investment options and strategies. This allows you to tailor your portfolio to your specific risk tolerance and financial goals.
- Flexibility on Withdrawals: Traditional and Roth IRAs have different rules regarding withdrawals. Roth IRA contributions can be withdrawn tax- and penalty-free at any time, while traditional IRA withdrawals before age 59½ are typically subject to a 10% penalty. Having both types of accounts provides you with more flexibility in accessing your funds when needed.
- Increased Account Insurance Coverage: In the unlikely event that the brokerage or bank holding your IRA fails, SIPC and FDIC insurance can cover your losses. By spreading your assets across multiple accounts, you can potentially increase your coverage beyond the standard limits.
Drawbacks of Having Multiple IRAs
While there are numerous benefits to having multiple IRAs, there are also some potential drawbacks to consider:
- Increased Paperwork: Managing multiple IRAs can lead to more paperwork, including tax forms, account statements, and privacy policy updates.
- Complex Retirement Planning: Managing multiple accounts requires careful planning and monitoring to ensure your overall asset allocation and investment strategy remain aligned with your retirement goals.
- Potential for Higher Fees: Some financial institutions may charge higher fees for smaller accounts. It’s important to compare fees and choose institutions that offer competitive rates.
Strategies for Maximizing Your Retirement Savings with Multiple IRAs
If you’re considering opening multiple IRAs, here are some strategies to help you maximize your retirement savings:
- Open a Roth IRA and a Traditional IRA: This allows you to benefit from both tax-advantaged options.
- Rollover Funds from Old Retirement Plans: Consider rolling over funds from old 401(k)s or other retirement plans into IRAs to consolidate your assets and potentially gain access to a wider range of investment options.
- Choose the Right Financial Institutions: Compare fees, investment options, and customer service when selecting institutions for your IRAs.
- Rebalance Your Portfolio Regularly: Regularly review your asset allocation and make adjustments as needed to maintain a balanced portfolio that aligns with your risk tolerance and retirement goals.
Having multiple IRAs can be a valuable strategy for maximizing your retirement savings. By carefully considering the benefits and drawbacks, and implementing effective strategies, you can leverage this approach to build a secure financial future. Remember, it’s essential to consult with a financial advisor to determine the best approach for your individual circumstances.
The drawbacks of multiple IRAs
The main drawback of multiple IRAs? The hassle factor. Here are some of the cons:
Double (or quintuple) the paperwork: Retirement accounts come with a lot of red tape. Even though managing your finances online is simpler than ever, having multiple accounts requires handling tax forms, notifications of updates and changes to services, privacy policies, and other disclosures.
Complicated retirement planning and portfolio management: An important component of retirement planning is asset allocation, which is the skill of balancing risk and reward in your portfolio. When your assets are dispersed among several accounts, it takes more work to keep an eye on performance and adjust the mix overall in order to maintain a consistent investing strategy.
Increased account and investment fee exposure: It makes sense to focus on higher-balance accounts and ignore smaller ones. However, failing to maintain and care for any retirement savings account can result in poor investment returns, particularly when it comes to investment fees, which over time reduce your earning power and include mutual fund sales loads and brokerage fees.
» In need of assistance? Review our comprehensive list of the top financial advisors.
How many IRAs can you have? How many Roth IRAs?
The amount of IRAs you can own is unlimited. It is possible to possess multiple units of the same type of IRA, such as multiple Roth, SEP, and traditional IRAs.
Having said that, opening more IRAs does not automatically raise your annual contribution cap.
That’s $7,000 for traditional IRAs and Roth IRAs ($8,000 if you’re 50 years of age or older) in 2024.
If you’d like, you can divide that amount among the different types of IRAs in any given year. (If you’re rolling over money from a previous employer’s retirement plan, such as a 401(k), into an individual account, contribution limits do not apply.) ).
Discover how a backdoor Roth IRA could help you obtain a Roth IRA even if you don’t meet the requirements. Advertisement.
Charles Schwab |
Interactive Brokers IBKR Lite |
J.P. Morgan Self-Directed Investing |
|---|---|---|
| NerdWallet rating NerdWallets ratings are determined by our editorial team. The scoring formula for online brokers and robo-advisors takes into account over 15 factors, including account fees and minimums, investment choices, customer support and mobile app capabilities.
4.9 /5 |
NerdWallet rating NerdWallets ratings are determined by our editorial team. The scoring formula for online brokers and robo-advisors takes into account over 15 factors, including account fees and minimums, investment choices, customer support and mobile app capabilities.
5.0 /5 |
NerdWallet rating NerdWallets ratings are determined by our editorial team. The scoring formula for online brokers and robo-advisors takes into account over 15 factors, including account fees and minimums, investment choices, customer support and mobile app capabilities.
4.1 /5 |
|
Fees $0 per online equity trade |
Fees $0 per trade |
Fees $0 per trade |
|
Account minimum $0 |
Account minimum $0 |
Account minimum $0 |
|
Promotion None no promotion available at this time |
Promotion None no promotion available at this time |
Promotion Get up to $700 when you open and fund a J.P. Morgan Self-Directed Investing account with qualifying new money. |
| Learn More | Learn More | Learn More |
How many IRA accounts can I have?
FAQ
Can you have 3 retirement accounts?
Is it better to have one retirement account or multiple?
Can I have an IRA and a 401k?
Can you contribute $6000 to both Roth and traditional IRA?
How much should I set aside for retirement?
Making decisions about how much to set aside and which accounts to open will depend on your income, ability to contribute and the retirement lifestyle you envision. Some common retirement accounts include: 401 (k). Traditional IRA. Roth IRA. Health savings account. Here’s how to decide which accounts to use to save for retirement.
How many IRA accounts can I have?
The accounts can be traditional or Roth IRAs. (If you don’t already have an account opened, here are some of the best IRA accounts to consider.) There’s no limit to the number of IRA accounts you can have, but your contributions must stay within the annual limit across all accounts.
How many IRAs can I set up in a year?
There is no limit to the number of traditional individual retirement accounts, or IRAs, that you can establish. However, if you establish multiple IRAs, you cannot contribute more than the contribution limits across all your accounts in a given year.
How many retirement accounts should you have?
There isn’t a hard-and-fast rule for how many retirement accounts you should have. It really comes down to being strategic. For example, you might start out with a 401 (k) through your workplace. This is often a smart place to stash your savings, especially if your employer offers a company match.