Maybe you’re in the early stages of retirement planning or you already have a few years under your belt, either way, sifting through account options can be overwhelming. That’s especially true if you already have an IRA and are considering opening another one.
You may be asking yourself “how many Roth IRAs can I have” or wondering if you and your spouse can have multiple Roth IRAs. Fortunately, the answer is simpler than you may think. Here’s everything you need to know about having multiple Roth IRA accounts and how they affect your ability to have other retirement accounts, like traditional IRAs or self-directed IRAs.
How Many IRAs Can I Have? Here’s How Many
The IRS doesn’t limit the amount of Roth IRAs you can have. But if you have more than one Roth IRA (or are thinking about opening another one), there is one rule you need to keep in mind: contribution limits.
The IRS sets contribution limits for various retirement accounts, including IRAs. The current traditional and Roth IRA contribution limit is $6,500 a year if you’re under 50 years of age. If you’re 50 or older, you can make an additional $1,000 catch-up contribution each year.
That means the total amount you can contribute to your IRA accounts, whether you have two or twenty, is $6,500 per year ($7,500 if you’re over 50). The limit is also applied across all IRAs, not just Roth IRAs. So if you contribute $4,500 to your traditional IRA in a tax year and are under 50 years old, you could only contribute $2,000 to your Roth that same year.
If you exceed the limits, you will need to pay a penalty for the excess amount.
What about a rollover IRA? Fortunately, contribution limits do not apply to rollover IRAs. They also don’t apply to qualified reservist repayments.
Roth IRAs and filing status and income-based limits
Roth IRAs are also subject to income-based contribution limits that vary by filing status. The table below highlights contribution limits based on your income.
|Filing status||Modified AGI||Contribution|
|Married filing jointly or qualifying widow(er)||Less than $204,000||Full amount|
|Married filing jointly or qualifying window(er)||$204,000 to $213,999||Reduced amount|
|Married filing jointly or qualifying widow(er)||$214,000 or more||Zero|
|Married filing separately while living with spouse||Less than $10,000||Reduced amount|
|Married filing separately while living with spouse||$10,000 or more||Zero|
|Single, head of house household, or married filing separately and not living with spouse||Less than $129,000||Full amount|
|Single, head of house household, or married filing separately and not living with spouse||$129,000 to $143,999||Reduced amount|
|Single, head of house household, or married filing separately and not living with spouse||$144,000 or more||Zero|
Can I Have a Traditional, Roth, and Self-Directed IRA?
You can make contributions to numerous IRAs, regardless of whether they are traditional, Roth, or self-directed. Since self-directed IRAs can be traditional or Roth accounts, the same overarching contribution limits apply: $6,000 up to the age of 49 and $7,000 if you’re 50 or older.
If you have a Roth self-directed IRA, you may also be subject to contribution income and filing status-based contribution limits.
What are the Pros and Cons of Having Multiple Retirement Accounts?
If you have or are considering opening multiple Roth IRA accounts, or retirement accounts in general, it’s important to understand the benefits and drawbacks of this investment strategy.
Pros of having multiple retirement accounts
- Having multiple retirement accounts can help you diversify your investment strategy, giving you access to a variety of assets, especially if you opt for a self-directed IRA.
- Maintaining multiple retirement accounts can allow you to leverage different contribution limits. This can be a wise move if you have an IRA account and know you’ll exceed the annual contribution limits.
- Contributing to different types of retirement accounts, like a traditional and Roth IRA or a Roth IRA and 401(k), allow you to strategically take advantage of upfront and delayed tax benefits offered by different accounts.
Cons of having multiple retirement accounts
- Depending on the type of accounts you have, managing multiple retirement investments can be time-consuming, especially if they are subject to different rules and requirements due to your tax filing status or income.
- Maintaining two or more IRAs can leave you at greater risk of exceeding your contribution limits if you don’t maintain awareness and plan properly.
Can Married Couples Have Multiple IRAs?
Married couples planning for retirement together can have multiple IRAs. If you and your spouse have or are considering opening multiple IRAs, there are some things to keep in mind.
Each spouse can contribute to their IRA account up to the IRS limits. It’s important to note that there are different limits based on your filing status (as outlined in the table above).
For instance, if you’re married but filing separately and you still live together, you may have a reduced rate or be unable to contribute. At the beginning of each tax year, it’s a good idea to make sure your contribution plans still align with your material status and income.
In addition, to contribute to an IRA, an individual must earn taxable compensation during the tax year. But what if you or your spouse is unemployed or are a stay-at-home caregiver? Fortunately, even if one of you doesn’t have an income in the tax year, you can contribute as long as the other spouse has income for that year and you file jointly.
Is it Better to Have a Roth, Traditional, or Self-Directed IRA?
As is often the case with investment vehicles, there’s no one-size-fits-all approach to retirement savings. Roth, traditional and self-directed IRAs each have their own pros and cons and the best one for you is highly dependent on your goals and your circumstances.
Here are some things to keep in mind:
Roth IRAs are advantageous to individuals who think they will be in a higher tax bracket when they retire. That’s because Roth IRA contributions are made with pre-taxed dollars, so you won’t pay taxes on qualifying withdrawals.
Roth IRAs also allow investors to withdraw contributions tax-free and penalty-free (you may need to pay taxes and penalties on earnings if you withdraw them before the account is 5 years old. That can give individuals flexibility on when and how they spend their savings.
Traditional IRAs are a good option if you think you’ll be in a lower tax bracket when you enter retirement. Contributions to this type of IRA are made with pre-tax dollars and only taxed when you make qualifying withdrawals after the age of 59 ½.
Traditional IRAs also may be a wise option for individuals or couples who face income-based contributions limits under Roth IRA regulations.
Self-directed IRAs, which can be traditional or Roth, are best suited for investors that want complete control over their retirement account and are seeking to invest in alternative assets, like real estate, cryptocurrency, or metals.
The good news is that you don’t have to pick a single type of IRA. Instead, you can choose more than one and take advantage of the benefits of each to strategically plan your retirement. If you do have more than one IRA, keep in mind that you will be subject to a contribution limit and that the limit applies to the total amount you contribute to all IRAs, not just each account.
If you’re considering opening an IRA, Roth or otherwise, contact Horizon Trust. Our experts can help you evaluate your options and choose the best type and number of IRA accounts to best suit your retirement goals.