How Many IRAs Can You Have?

Understanding IRA Accounts

There have been changes to IRA accounts in recent years. In December of 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act went into effect. The SECURE Act eliminated the maximum age for traditional IRA contributions, which was previously capped at 70½ years old.

A Roth IRA can also be established at any age, as long as you have eligible compensation and meet the income requirements. A Roth IRA doesn’t provide a tax deduction in the years that contributions are made, but it allows for tax-free withdrawals in retirement as long as the person is over the age of 59½ and the account has been opened for more than five years.

Conversely, a traditional IRA provides a tax deduction in the years that the contributions are made, but the withdrawals in retirement are taxed at the retiree's income tax rate in the year of the distribution.

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Can I have two IRAs?

If you are wondering, “Can I have two IRAs?” or “can I open multiple Roth IRA accounts?” the answer is yes. It is possible for you to have two or more IRAs. If you are wondering how many IRAs can one person have, the answer is that you can have several. Situations in which you might have more than one IRA include if you roll over the savings from a 401k into a traditional IRA and also have a Roth IRA.

Similarly, you might have a SEP or SIMPLE IRA at your job and a Roth IRA outside of your work. If you have multiple IRA accounts, it is important that you understand the rules and how the contribution limits work.

Why Would You Consider Multiple IRAs?

You might wonder why someone would consider having multiple IRAs if there is a relatively small limit on the contributions. There are a few reasons why it might make sense for some to take that approach versus having just one account.

Here are a few of the potential benefits and reasons why you might want to have multiple IRAs:

Investment Diversification

Diversification is often a key part of a retirement strategy. Having multiple IRAs allows you to put your funds in different financial institutions or different types of investments. However, diversification cannot guarantee profit or protection against loss in a declining market.

Tax Diversification

Depending on the type of IRA you choose, you could potentially see different tax benefits. Using a mix of multiple IRAs means you might maximize some of your tax opportunities in retirement.

Inheritance and Estate Planning

Some people choose to have a few IRAs to cover each of their children. That can help to make future estate planning more straightforward, as each child has their own IRA inheritance.

Potential Withdrawal Flexibility

The rules around withdrawals vary between IRA types. Roth and traditional IRAs each have some benefits. Depending on your plan for retirement, you could potentially have more flexibility for making early withdrawals if you need to.

You’ll also want to consider some of the potential cons or disadvantages of having multiple IRAs before pursuing that strategy. For instance, it could be difficult to manage multiple IRA accounts, might require more funds upfront (to satisfy minimum balance requirements) and can potentially create more fees at withdrawal.

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IRA contributions after age 70½

For 2020 and later, there is no age limit on making regular contributions to traditional or Roth IRAs.

For 2019, if you’re 70 ½ or older, you can’t make a regular contribution to a traditional IRA. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of your age.

Roth IRA Contribution Limits for 2021 and 2022

Roth IRAs have the same annual contribution limits as traditional IRAs for 2021 and 2022: the lower of $6,000 or your taxable compensation. If you are 50 or older by the end of 2021 or 2022, you may contribute up to $7,000 to a Roth IRA in that year.

Not everyone is allowed to contribute to a Roth IRA, however. If your income is above certain thresholds, you may be ineligible for a Roth IRA or your contributions may be limited. Here are the Roth IRA income thresholds for 2021 and 2022:

Roth IRA Income Limits in 2021 and 2022

Your filing status Your 2021 income Your 2022 income You may contribute:

Single, head of household or married filing separately (and you did not live with your spouse at any time during the year)

Less than $125,000

Less than $129,000

Up to the annual limit

Single, head of household or married filing separately (and you did not live with your spouse at any time during the year)

$125,000 to $140,000

$129,000 to $144,000

A reduced amount

Single, head of household or married filing separately (and you did not live with your spouse at any time during the year)

More than $140,000

More than $144,000

Zero

Married filing jointly or qualified widow(er)

Less than $198,000

Less than $204,000

Up to the annual limit

Married filing jointly or qualified widow(er)

$198,000 to $208,000

$204,000 to $214,000

A reduced amount

Married filing jointly or qualified widow(er)

More than $208,000

More than $214,000

Zero

Married filing separately

Less than $10,000

Less than $10,000

A reduced amount

Married filing separately

More than $10,000

More than $10,000

No deduction

IRA Calculator

Use our traditional IRA calculator to see how much your nest egg will grow by the time you reach retirement.

The Benefits of Owning Multiple IRA Accounts

There are times when having multiple IRA accounts can be a clear benefit.

Here are some examples:

1. SIPC or FDIC insurance limits

If you are a fixed-income investor (think bonds or preferred stock) and prefer the safety of banks, there is a $250,000 FDIC insurance limit for bank accounts. If your IRA balances are higher than this, you may need to maintain an IRA at two or more banks. The same is true of SIPC insurance. The limit is $500,000 in cash and securities per account, which includes $250,000 in cash. If your IRA balance exceeds $500,000, you might have more than one account.

2. You feel safer not having all of your “eggs in one basket”

Apart from either FDIC or SIPC insurance, you might just feel safer having your retirement assets spread across two or three accounts, rather than in a single account. Even though your funds are insured, the thought of bank or broker default can be unnerving in connection with something as important as your retirement savings.

3. Diversification into very specific investment accounts

There may be certain investment vehicles that specialize in certain investment strategies. For example, you may have one that’s a low-cost trading account, another that’s a family of funds, and still, a third that invests in specific sectors, such as real estate or natural resources.

4. Different types of IRA accounts

As mentioned earlier, you may have a traditional IRA and a Roth IRA. And if you’re self-employed, you might also have a SEP IRA. It largely depends upon personal circumstances.

5. Different IRAs for different retirement purposes

As you get closer to retirement, you may decide that you want different IRAs that each serve a certain purpose. For example, you can have one IRA account that functions primarily as a source of regular income.

A second account could be dedicated to growth investments so that your retirement portfolio never runs dry.

Still, a third IRA could function as a large emergency fund, so that you’ll have an account to tap when a large expense comes up, such as an uncovered medical expense, the replacement of a car, helping your adult children or even major work to be done on your home.

6. Managed account vs. self-directed account

A lot of people are hybrid investors – they prefer to have most of their money professionally managed, but still want to dabble in do-it-yourself investing. Such an investor might have most of their money in a managed account, such as Betterment or M1 Finance, or with a DIY account set up through E*Trade or TD Ameritrade. It’s nice to have choices!

Does it make sense to have both Roth and Traditional IRAs?

It may make sense to own multiple IRAs if each IRA has a different feature or advantage. Since Roth IRAs offer the potential for tax-free distributions, it may be a good idea to add money to a Roth account, if eligible, while you are in a lower tax bracket and think you may be in a higher one at retirement. Having a Traditional IRA may be better if you are in a higher tax bracket now and prefer to bring your current taxable income down. Be aware that if you participate in an employer-sponsored retirement plan, your eligibility to deduct contributions to a Traditional IRA is phased out, based on modified adjusted gross income (MAGI) ranges that are published annually and correspond to your federal tax filing status. If you are eligible for a Roth IRA, your annual contributions are made with after-tax dollars and are not tax-deductible. To be eligible to contribute to a Roth IRA, your MAGI must be below specified limits. To find out more, read Merrill’s Contribution Limits and Tax Reference Guide (PDF).

Understanding IRA Limits

The IRS sets no cap on the number of IRAs you can own. However, there is a limit set on the amount of money you can contribute in total to your IRAs, regardless of whether they’re Roth or traditional accounts.

The IRS currently caps contributions to Roth and traditional IRAs at $6,000 per year for those under 50. If you’re 50 and older, that limit increases to $7,000. The extra $1,000 is called a catch-up contribution.

For example, you could have three traditional IRAs and be 37 years old, but the total maximum dollar amount you contribute in 2022 must be no more than $6,000 among all accounts. In this case, you could deposit $2,000 in each of your three traditional IRAs.

The same rules apply for Roth IRAs. For 2022, the maximum contribution level is set at either $6,000 or $7,000, depending on your age. While there is no limit to the number of Roth IRAs you can own, you can’t go over the contribution limits set by the IRS.

In this case, if you are 53 and have two Roth IRA accounts, you can contribute a maximum of $3,500 to each of them, giving you a total of $7,000, the IRS limit.

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How Many IRA Accounts Does The IRS Allow?

The IRS actually allows for multiple IRA accounts. There is no limit to the number of IRA accounts you can have, but there are contribution limits. For 2022, the contribution limit for IRAs is $6,000. If you’re 50 or older, you can make catch-up contributions of an additional $1,000, for a total of $7,000.

The 2022 IRA income limits are (this applies to both Roth and Traditional IRA’s):

  • $144,000 if you’re filing as a single taxpayer
  • $214,000 if you’re filing jointly as a married couple
  • $144,000 if you’re filing as a head of household

Related: Learn more about the Roth IRA Rules.

Disadvantages of having multiple IRAs

There are some disadvantages to having several IRAs. If you open an IRA at a brokerage, most will charge you a fee to set it up and to manage it. Having several IRAs might mean that you will have more fees.

Having more than one IRA also might mean that you will have to spend more time tracking your different investments. Each new IRA is also likely to have its own minimum balance requirement. If you do not have enough savings set aside, it might be difficult to open multiple accounts.

IRA contribution limits

If you invest in multiple IRAs, the total amount of money you can contribute to both accounts can’t exceed the annual limit of $6,000 ($7,000 if 50 or older). The IRS might penalize you with a 6% excessive contribution penalty if you exceed this amount.

Keep in mind that the contribution limits change every year. The $6,000 limit is current for 2022. But you’ll need to regularly check the contribution limits for IRAs each year to ensure you aren’t going over the limit.

So, you could have a traditional IRA and a Roth IRA. But you’ll only be able to contribute a combined total of $6,000 in 2022. Can you have more than one Roth IRA? Absolutely! But again, you’ll only be able to contribute a combined total of $6,000 in 2022.

Can I contribute to an IRA if I participate in a retirement plan at work?

You can contribute to a traditional or Roth IRA even if you participate in another retirement plan through your employer or business. However, you may not be able to deduct all of your traditional IRA contributions if you or your spouse participates in another retirement plan at work. Roth IRA contributions might be limited if your income exceeds a certain level.

Examples

  1. Danny, an unmarried college student earned $3,500 in 2020. Danny can contribute $3,500, the amount of his compensation, to his IRA for 2020. Danny’s grandmother can make the contribution on his behalf.
  2. John, age 42, has a traditional IRA and a Roth IRA. He can contribute a total of $6,000 to either one or both for 2020.
  3. Sarah, age 50, is married with no taxable compensation for 2020. She and her spouse, age 48, reported taxable compensation of $60,000 on their 2020 joint return. Sarah may contribute $7,000 to her IRA for 2020 ($6,000 plus an additional $1,000 contribution for age 50 and over). Her spouse may also contribute $6,000 to an IRA for 2020.

Bottom Line: Should You Have Multiple IRAs?

The answer to this question largely depends on your investment goals. If you’re looking for tax diversification, you’re interested in naming multiple beneficiaries or you want to explore investment options in a self-directed IRA that your current IRA doesn’t offer, then it could be a good strategy to employ.

On the other hand, there are some downsides to consider. For one thing, having multiple IRAs could mean paying more in investment and management fees. This is particularly relevant if your accounts are held at different brokerages. It may be possible to minimize the bite taken by fees by holding multiple IRAs at the same brokerage. That can also make it easier to manage your asset allocation in each account and rebalance them accordingly. Rebalancing is important for maintaining diversification and managing risk.

Finally, consider what you can contribute to an IRA each year. If you’re unable to meet the annual contribution limit right now, you may be better off focusing on how to get to max out your current account before adding more IRAs into the mix.

Downsides To Opening Multiple Roth IRAs

The main downside to opening multiple Roth IRAs is that it can get confusing. “From the IRS’ perspective, you only have one Roth IRA, no matter how many different IRA custodians you have money with,” said Steve Burkett, a Certified Financial Planner with Palisade Investments, in an email to The Balance. “[It] doesn’t make much sense to have more than one Roth IRA custodian, and this could cause tracking/contribution errors.”

If you don’t keep close track of which funds you contributed to which accounts at which times, you could be penalized for violating the Roth IRA 5-year rule, even if it’s an accident. The rule states that you can only make qualified distributions (which aren’t taxed or penalized) of investment earnings if the cost basis for the earnings has been in the account for at least five years.

Additionally, if you choose to have multiple accounts to use different investment strategies, you might accidentally overweight one strategy by contributing to the wrong account.

If you have multiple retirement accounts and wish to consolidate them into one Roth IRA, you can do that by rolling over the amounts. You may face tax liabilities if you’re rolling over a traditional IRA or other non-Roth account.

How do the funds in Roth IRAs grow?

The funds in a Roth IRA grow based on how they’re invested. If they’re invested in bonds, they’ll grow based on income from the bonds. If they’re invested in stocks, they’ll grow based on dividends and capital gains.

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