How many Roth IRAs can I have?

If you’re wondering if you can open more than one Roth IRA, the answer is: yes. In fact, you can have as many IRAs as you want. You can even have multiple traditional and Roth IRAs. As long as you don’t go over the annual contribution limit for all your IRAs combined, there are no tax penalties for contributing to more than one individual retirement account. 

Having multiple Roth IRAs can have benefits for reaching your retirement saving goals. At the same time, opening more than one IRA comes with increased complexity and the potential that you’ll pay more in fees. So you’ll want to weigh your options and choose the strategy that best aligns with your circumstances. 

Roth IRAs basics

How does a Roth IRA work?

A Roth IRA is a tax-advantaged retirement account in which you can invest money for your future. You contribute after-tax dollars, and your money grows tax-free in the account. You can withdraw your initial contributions at any time with no penalty. After age 59½, you can make qualified withdrawals of both your contributions and earnings tax-free. 

Roth IRA eligibility requirements

There are no age restrictions for opening a Roth IRA; anyone with earned income can open one as long as you meet the income requirements. And unlike traditional IRAs, you’re not required to take distributions at any age, so you can let your money grow as long as you like; you can even pass your Roth IRA down to your heirs after you pass away. 

Roth IRA contribution limits

The IRS limits how much you can contribute to your IRAs. For 2024, the contribution limit is $7,000 for people under 50 and $8,000 if you’re 50 or older. This limit applies to all your IRAs combined, no matter how many you have. Contributing to more than one Roth IRA does not mean you can exceed the annual contribution limit. So if you’re planning to max out your Roth IRA, opening another one won’t allow you to contribute extra money beyond the annual limit.  

It’s worth noting that you can contribute to a 401(k) through your employer and also have however many Roth IRAs you want. Contributions to a 401(k) do not affect your Roth IRA contribution limit. Many people contribute to both types of accounts to help them meet their retirement savings targets.   

Roth IRA income restrictions

Your contribution limit may be reduced if you earn over a certain threshold of money in the year.  The IRS places restrictions on how much you can contribute to a Roth IRA based on your income. For the 2024 tax year, if you make more than $146,000 filing singly (or $230,000 filing jointly), your contribution limit will be reduced. And you can’t contribute to a Roth IRA at all if your income is over $161,000 filing singly (or $240,000 filing jointly). 

Benefits of having multiple Roth IRAs

More diversification

Many people decide to have more than one Roth IRA so they can increase diversification across their entire investment strategy. Roth IRAs give you a lot of flexibility in choosing your investments, including stocks, bonds, and exchange-traded funds (ETFs). Building a diversified portfolio, in which you hold multiple types of investments, can be an important way to minimize risk when investing. For example, while stocks might perform well in a booming economy, bonds may provide more stability during market downturns. By diversifying, you’re not putting all your eggs in one basket, which can help protect your investments from market volatility.  

Options for financial institutions

Opening multiple Roth IRAs with different financial institutions can offer benefits like access to unique investment options and reduced risk of institutional failure. You might also want to take advantage of varied features among institutions, such as lower fees, specialized investment products, or superior online tools. 

Another reason to open multiple Roth IRAs with different financial institutions is FDIC insurance. While most types of investment accounts are not covered by FDIC insurance, some portions of your Roth IRA may be if you hold it with an FDIC-insured depository bank. The FDIC protects up to $250,000 of your qualified depository assets per institution. If the value of qualified assets in one Roth IRA is nearing that limit, you may consider opening another Roth IRA at a different FDIC-insured bank. 

Investment strategy flexibility

Different Roth IRAs can be tailored to different investment strategies. For instance, you might dedicate one Roth IRA to growth stocks for long-term gains and another to dividend-paying stocks and bonds to generate passive income. You could also use a robo-advisor for one account to automate your investments while actively managing another account. This flexibility allows you to implement various strategies that align with your financial goals and risk tolerance.

Simplified inheritance designations

If you want to build wealth for the next generation, Roth IRAs can be beneficial because they can be passed to your heirs tax-free after your death. If you have more than one heir, having multiple Roth IRAs can simplify beneficiary designations and estate planning. You can designate different beneficiaries for each account, ensuring that your assets are distributed according to your wishes. For instance, you might allocate one Roth IRA to a spouse and another to a child, making it easier to manage your estate and avoid potential conflicts among heirs.

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Downsides of having multiple Roth IRAs

Increased complexity

The more retirement accounts you have, the more time and effort it takes to keep track of them. Managing multiple Roth IRAs requires diligent record-keeping and careful monitoring, especially when tracking contributions to ensure you don’t exceed annual limits. If you’re a hands-on investor, you may wind up spending a lot more time monitoring investment performance and managing your portfolios across different accounts.  

More fees 

You’ll generally have to pay some fees for any retirement account you have, such as account maintenance fees and transaction commissions. Having multiple Roth IRAs means you’ll be paying fees for each account, so you’re more likely to pay more in fees overall compared to having just one Roth IRA. Different financial institutions have different fees, so you may wish to do some comparison shopping to make sure the cost of opening multiple IRAs doesn’t outweigh the potential benefits. 

Potentially exceeding contribution limits 

Remember, the annual contribution limit applies to all your IRAs combined, whether you have just one or a dozen. When you contribute to multiple Roth IRAs in a year, it’s more complicated to keep track of your contributions, and it’s easier to accidentally exceed your contribution limits. This is especially challenging if your income fluctuates and you’re not sure if your earnings will exceed the income restrictions by the end of the year. Exceeding the contribution limit can result in penalties and additional taxes, eating into your returns. 

Meticulous beneficiary designations

While multiple Roth IRAs can make it easier to designate inheritance for different heirs, you need to ensure your designations are clear and properly set up. Coordinating beneficiary designations across multiple Roth IRAs can be challenging, especially if you make changes to them throughout your life. If you wind up with conflicting or inconsistent designations, it can lead to complications in estate planning and asset distribution. Ensuring that all designations are aligned with your estate plan requires careful attention and regular updates to account information.

Tips for managing multiple Roth IRAs

Track contributions closely

To ensure you don’t go over the annual contribution limit, it’s crucial to track your contributions carefully for all your IRAs. Consider using financial software or a spreadsheet to monitor the contributions you make throughout the year and ensure you stay within the limit. This approach helps you prevent errors and avoid potential penalties.

Calculate fees and costs

Keep track of all the fees you incur for each Roth IRA, including the amount of each fee and what it’s for. At the end of the year, take a look at how much it has cost you to have multiple Roth IRAs compared to the returns you’re earning for each account. Also pay attention to changes in fees from each institution and compare costs among different accounts to ensure you’re getting the best value.

Keep good records

Accurate record-keeping is essential for managing multiple Roth IRAs. Organize your paperwork and use digital tools to keep track of account statements, contributions, and beneficiary designations. This practice helps ensure that your accounts are properly managed and aligned with your financial goals.

Consider consolidation carefully

While there is no limit to the number of Roth IRAs you’re allowed to have, you may at some point wish to consolidate them to reduce the time and cost of maintaining them. Consolidating multiple Roth IRAs into a single account can simplify management, but it may also lead to a loss of diversification. Weigh the pros and cons before deciding to consolidate. 

How many Roth IRAs are right for you?

You can have as many Roth IRAs as you like, but whether that’s the right approach for you depends on your lifestyle and goals. If you want more diversity and flexibility, it may be worth the extra effort and cost of managing multiple accounts. Consider whether you have the time to keep detailed records and ensure you don’t exceed your contribution limits. If you’re unsure about how many Roth IRAs you should have, or if your financial picture is complicated, you may want to talk with a financial advisor about what makes sense for your circumstances. 

At the end of the day, contributing to a Roth IRA can help you build up money for retirement, whether you open just one account or multiple. The sooner you start investing for your future, the more your money can grow. 

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