“How to Manage Multiple IRAs Effectively”

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How Many IRAs Can You Have?

You can have multiple IRAs if you choose. As long as you stay within IRS eligibility guidelines and contribution limits, you can open and fund as many IRAs as you’d like. This may be good news if you’re thinking of opening a Roth IRA to complement your traditional 401(k) plan at work, or you’re considering an IRA CD to take advantage of high interest rates and supplement your current IRA. Multiple IRAs can help diversify your tax strategy and your investment portfolio.

However, if you aren’t deliberate about your choices, multiple small-value IRAs with different providers can add complexity without doing much in the way of diversification. If you’re thinking about opening an additional IRA account, or you’ve already got an assortment of IRAs, read on for more about the pros and cons of multiple IRAs.

How Much Can I Contribute to an IRA?

In 2024, you can contribute up to $7,000 to a traditional IRA, Roth IRA, or a combination of multiple accounts. Here’s the key: Your combined contributions can’t add up to more than $7,000 ($8,000 if you’re age 50 or older). Your combined IRA contribution also can’t exceed your taxable income for the year, so if you only earn $5,000 in 2024, you can’t contribute more than $5,000.

Can I Have a Roth IRA and a Traditional IRA?

You can have both a traditional and a Roth IRA. Because each type of IRA offers different tax benefits, there’s a decent argument for having both. Contributions to traditional IRAs are pretax, but your withdrawals are taxable as ordinary income. Roth IRA contributions aren’t tax-deductible, but you don’t pay taxes when you make qualified withdrawals in retirement. Having both types of IRA gives you the ability to prioritize either a current deduction or future tax savings—or a mix of both.

Can I Have Multiple Roth IRAs?

You can have multiple Roth IRAs, or multiples of any type of IRA account. As long as your income makes you eligible to open and fund a Roth IRA, you’re free to open as many additional Roth accounts as you’d like. Simply having duplicate accounts isn’t necessarily helpful; it mostly adds to your administrative load.

But you might consider having separate Roth accounts if you want to invest one in funds and use the other for tax-advantaged active trading. In a Roth IRA, you won’t pay taxes on capital gains, dividends, or interest, though you will have to follow IRS guidelines on withdrawing your money if you want to avoid penalties.

Can I Also Contribute to a SEP IRA or SIMPLE Plan?

If you’re self-employed or own a business, you can contribute up to 25% of your compensation or $69,000 to a SEP IRA in 2024. Alternatively, you can contribute up to $16,000 to a SIMPLE IRA, with a catch-up contribution of $3,500 if you’re 50 or older.

Because SEP IRA and SIMPLE plans are technically employer-based retirement plans, you can contribute to either one in addition to your traditional or Roth IRA. Check with your accountant or tax advisor for more information on setting up a SEP IRA or SIMPLE plan.

Does My Spouse Need Their Own IRA?

Spouses must maintain separate IRA accounts. If your spouse doesn’t earn wages or a salary and you file jointly, you can open and contribute to a separate spousal IRA on their behalf. Spousal IRAs are subject to the same contribution limits as individual IRAs: $7,000 (or the amount of taxable compensation you had) in 2024. Your contributions to a traditional spousal IRA should be deductible as long as neither you nor your spouse participated in a retirement plan at work.

Pros and Cons of Having Multiple IRAs

How do you decide whether it’s worth the additional effort of maintaining more than one account? Where multiple IRAs give you meaningful tax advantages or additional saving potential, they may be worthwhile. If they simply increase your workload or cost you money, you might be better off keeping it simple.

Pros of Multiple IRAs

Having more than one IRA—and particularly more than one type of IRA—may offer you more flexibility than having only one type of account. Here are a few of the potential benefits:

• You’ll have more than one tax benefit to choose from during your working years. You can decide, year by year, whether you’re better off maximizing your tax deductions with a traditional IRA or reaping greater tax savings in retirement with a Roth.
• You’ll have more distribution choices when you retire. Once you retire, the money you withdraw from your traditional IRA is taxed as regular income. Qualified distributions from a Roth are tax-free. Having both types of accounts can help you approach your taxes strategically in retirement. In addition, Roth IRAs don’t have required minimum distributions, as traditional IRAs do, giving you even more flexibility when you’re retired.
• You may be able to contribute more. Though you can’t contribute more than $7,000 (or $8,000 if you’re 50-plus) to your traditional and Roth IRA accounts in total, you may be able to use a SEP IRA, SIMPLE IRA, or spousal IRA to contribute beyond the $7,000 limit. For example, if you’re self-employed and have a SEP IRA, you can contribute up to $69,000 to your SEP IRA and an additional $7,000 to a Roth IRA. If your spouse has a spousal IRA, you may be able to contribute $7,000 to their account as well as $7,000 to yours.
• You may diversify your investments. It’s important to note that different IRAs don’t necessarily invest all that differently. For example, investing in an S&P 500 fund is pretty much the same at any brokerage or bank; even different robo-advisors or mutual funds may invest in some of the same things. Still, a new IRA may give you the chance to try out a different provider or investing approach, or branch out into something like an IRA CD at your bank.

Cons of Multiple IRAs

Because your time and attention are finite, multiple accounts also have their downsides. If you maintain multiple IRAs—and especially multiples of the same type of IRA—you may find it more difficult to manage your accounts effectively. Here are a few drawbacks to think through:

• You’ll have more to manage. More accounts may mean more provider websites to visit, more tax forms to collect and file, more account balances to add up. And yet, this additional work doesn’t necessarily result in better returns or clearer tax strategy; it could just be more work.
• It may be harder to measure portfolio-wide performance or track goals. What’s your total retirement savings balance? What kinds of returns have you seen, year over year? How are your investments allocated? The more accounts you have, the more work it takes to answer these questions—and the more complicated it might be to take actions like rebalancing your portfolio.
• You may pay multiple fees. IRAs usually have annual account fees, which can multiply as your accounts multiply. Multiple fees cut into your returns, often without providing any clear benefit. If you decide to keep multiple IRAs, ask if there are ways to minimize fees.

How to Effectively Manage Multiple IRAs

Maintaining multiple IRAs without losing track of your goals is easier if you can streamline and centralize control. To the extent that it’s possible, simplify. While you may have a legitimate reason for having both a traditional and a Roth IRA, you probably don’t need five different traditional IRAs holding similar investments. Here are a few suggestions for managing multiple IRAs effectively.

• Roll over accounts where possible. If you have multiple IRAs of the same type, you can typically roll them over into a single account. You can also transfer funds from a 401(k) with a former employer into a rollover IRA. Be sure to follow IRS rollover guidelines to avoid penalties for early withdrawal.
• Choose a single provider. Many IRA providers offer multiple types of accounts, so you can keep different types of IRAs with the same company. Consolidating providers means you’ll find all of your statements, transaction records, and tax forms in one place. You’ll have an easier time qualifying for account minimums and relationship benefits like lowered or waived fees. If you insist on having more than one provider, try to narrow your choices as much as possible.
• Create a centralized system. Whether you use your provider’s website or choose financial software to manage it all, find a way to track all of your IRA accounts efficiently. You want to know, at a glance, what your account balances are, how your investments are allocated, and how your investments are performing.
• Think of the big picture. The primary benefit of having multiple IRAs is flexibility. But flexibility is only helpful when you use it to meet your overall objectives. Getting help from a tax advisor or financial planner may help you fine-tune your strategy now and bring your goals into focus for the long term.

The Bottom Line

You can have multiple IRAs, but you may or may not need them. Ideally, additional IRAs should offer tax benefits or unique investments you don’t already have. Having multiple IRAs should factor into your larger retirement plan and tax strategy. If multiple accounts are simply duplicates of one another, you may be better off streamlining.

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