When planning for retirement, it’s important to understand the various types of Individual Retirement Accounts (IRAs) available to you. One popular option is the Roth IRA, known for its tax-free growth and tax-free withdrawals in retirement. But a common question that often arises is: Can you have more than one Roth IRA? The short answer is yes, you can. However, there are certain considerations and rules to keep in mind.
Multiple Roth IRAs
Yes, it’s possible to open and maintain multiple Roth IRAs. This could be for various reasons such as wanting to use different brokerage firms for diversification, or to separate different types of investments. For instance, you might have one Roth IRA dedicated to aggressive growth investments, and another focused on more conservative, income-generating investments.
Contribution Limits
While you can have more than one Roth IRA, it’s important to note that the total amount you can contribute to all of your Roth IRAs (and traditional IRAs) combined is still limited to the annual contribution limit set by the IRS. That limit is $6,000 per year for individuals under the age of 50, and $7,000 per year for those aged 50 or over, which includes a $1,000 catch-up contribution.
It’s also worth noting that your ability to contribute to a Roth IRA may be limited or completely phased out based on your modified adjusted gross income (MAGI) and tax filing status.
Rollovers and Conversions
Another way multiple Roth IRAs can come into play is through rollovers or conversions. If you have a traditional IRA or a 401(k) with a previous employer, you may decide to convert that account to a Roth IRA, resulting in an additional Roth IRA. Do note that such conversions have tax implications and you’ll likely owe taxes on the pre-tax contributions and earnings being converted.
In addition, rolling over one Roth IRA to another does not affect your annual contribution limit. So, if you wanted to consolidate multiple Roth IRAs into one account or transfer your Roth IRA to a different brokerage, you could do so without it counting against your contribution limit.
The Bottom Line
While you are allowed to have more than one Roth IRA, having multiple accounts doesn’t increase the total amount you can contribute each year. In other words, having multiple Roth IRAs isn’t a strategy for bypassing IRS rules on annual contribution limits.
Also, maintaining multiple accounts may make your financial situation more complex and harder to manage. However, it could potentially be beneficial for diversification of services from different brokerages or organization of different types of investments.
As with all financial decisions, what works best depends on your personal situation and goals. It may be beneficial to consult with a financial advisor or tax professional to help determine the best strategy for you.
