Owning multiple IRAs: Frequently asked questions

If you invest in an individual retirement account (IRA), you already know these tax-advantaged plans can be powerhouses for retirement savings. But can you have multiple Roth IRAs and traditional IRAs? The answer is yes.

Maintaining numerous IRAs can help you strategically build your retirement savings. On the flip side, if you already own more than one IRA, you might benefit by consolidating them.

Here are the answers to several frequently asked questions about owning multiple IRAs, as well as key details to consider.

You can maintain as many IRAs (both Roth and traditional versions) as you'd like—there's no limit.

Yes. True to their name, IRAs must be owned by individuals and can't be held jointly. Spouses each can own multiple IRAs. (While you must have earned income to contribute to either type of IRA, working spouses can fund spousal IRAs for spouses who don't earn income. This is permitted only for couples who file a joint tax return.)

Yes, generally speaking, as long as you qualify and you and/or your spouse have earned income. While traditional IRAs have no income limitations to participate, Roth IRAs do have income thresholds to be eligible for participation. You are eligible to contribute to a Roth IRA in 2023 if your modified adjusted gross income is less than $138,000 (single filer) or less than $228,000 (joint filer).

No. The annual contribution limit is the same whether you have one IRA or 20. That limit pertains to both Roth IRAs and traditional IRAs.

If you're 49 or younger, you can contribute up to $6,500 (or 100% of your earned income if it's less) in 2023. If you're 50 or older, your contribution limit is $7,500 due to a catch-up provision designed to help boost your retirement savings. If you have multiple IRAs, the total contributions into all accounts cannot exceed this amount.

Yes. There's no limit on the number of different institutions where you may maintain accounts.

• Investment diversification. You can diversify your investments, which can help you minimize market risk.

• Tax-efficiency. Since traditional IRAs and Roth IRAs are taxed differently, owning both is a way to potentially diversify your tax liabilities. A traditional IRA is funded with pre-tax contributions. This delays your tax liability to the time in which you start taking withdrawals. A Roth IRA is funded with dollars in which you've already paid taxes on, leaving no additional taxation once you withdraw funds.

• Differences in tax deductibility. With a traditional IRA, you may be able to fully deduct your contributions on your tax return. With a Roth IRA, your contributions will not be tax-deductible.

• Varying required minimum distribution (RMD) rules. Traditional IRAs require you to start taking RMDs at a certain age (age 72-75 depending on your birthdate) for any earnings and conversions. Roth IRAs don't have required minimum distributions and you have the flexibility to take out the money you've contributed before age 59½ without penalties, given you meet certain requirements.¹

• Most retirement accounts have investment fees and other expenses that can add up over time.
• Having multiple active portfolios can make it harder to maintain your intended mix of diversified assets.
• Managing multiple IRAs can be challenging since you need to stay on top of contributions, withdrawals, account changes, plan statements and tax forms for each one.
• In the future, upon your death, your estate's executor will need to track down each of your IRAs to distribute the money to your beneficiaries. Maintaining several accounts at different institutions could make this a longer, more involved process for them.

Yes, consolidating can make account management, record keeping and tax reporting easier. Consolidating also can help you potentially steer clear of unnecessary fees. Consolidating balances doesn't affect your annual contribution limits.

Consider working with a financial advisor can help you understand your IRA assets and diversify them according to your goals and risk tolerance.

You can move assets directly from one institution to another between the same types of accounts (such as from a traditional IRA to another traditional IRA or from a Roth IRA to another Roth IRA). Since you don't take possession of the money during the process, you don't pay taxes. This method is called either an IRA-to-IRA transfer or a trustee-to-trustee transfer.

Another option is to convert your traditional IRA assets to a Roth IRA through a Roth IRA conversion.² If you expect your income—and thus your tax bracket—to rise in the future, completing a Roth conversion at today's tax rates may be right for you. When you convert, you'll owe taxes on the transaction in the year of the conversion, but withdrawals will be tax-free later.¹ Inversely, you can't convert money from a Roth IRA into a traditional IRA.

An indirect rollover involves taking funds from one IRA and moving them into a different IRA within 60 days of receiving those funds. Failure to comply with this 60-day window means the money is treated as a taxable distribution and subject to penalty. Keep in mind that IRS rules allow just one 60-day rollover every 12 months.

If you have additional questions around owning multiple IRAs, don't hesitate to reach out for guidance. A financial advisor can provide valuable insight and help you determine whether opening or combining IRAs is a good option for you. They can take a closer look at the tax implications of your financial decisions and guide you towards a tax-smart retirement plan.