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Roth IRA Rules: Can I Have More Than One IRA?

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Talk to your financial planner and ask if multiple IRAs are still the right answer Please consider  Getty Images/iStockphoto

Regarding Investment Accounts, Roth IRAI'm here. This is because Roth IRAs come with tax incentives and favorable withdrawal rules, making them an excellent choice for almost all types of investors.

A Roth IRA is a tax-advantaged retirement account that allows borrowers to withdraw tax-free funds upon retirement. Investors can't deduct their contributions from taxes, but they don't have to pay taxes on their earnings later. Investors can also withdraw their contributions at any time without penalty (although there are still some rules to be aware of). As such, some people use their Roth IRA to save for purposes such as buying a home or paying for their children's college education.

But how many Roth IRAs can you have? Is it generally a good idea to have more than one? Below we answer that question and offer some tips.

Can I have more than one Roth IRA?

There is no limit to the number of Roth IRAs, or IRAs in general. However, the individual annual contribution limit cannot be exceeded regardless of the number of IRAs. In 2022, the annual cap for those over 50 is $6,000 or $7,000. 

Contributing to multiple IRAs can make it difficult to track your annual contribution limit. If you use multiple IRAs, you should not exceed the limit. 6% fee on overage

A common reason people have multiple IRAs is to test performance across different providers. For example, you can open the Roth IRA on various robo-advisors and see which option offers better returns.

Some investors choose self-directed Roth IRAs that allow them to invest in more unconventional securities not available in regular Roth IRAs. 

Additional beneficiaries may be added to each Roth IRA. This simplifies wealth planning. For example, you can have multiple Roth IRAs per child.

Do you need multiple Roth IRAs?

Managing multiple IRAs can be difficult and cumbersome. And in many cases, you don't need to have different IRAs to reach your goals. 

For example, if you have multiple IRAs and you want each to have a different beneficiary, merge accounts into one I can do it. Simply create an IRA and add multiple beneficiaries in equal amounts. 

It may be useful to separate Roth IRAs. If you have converted a traditional IRA to a Roth IRA, it may be preferable to keep that IRA separate from the other Roth IRAs. You cannot withdraw tax-free income from a Roth IRA unless you have been contributing to the Roth IRA for at least five years. 

“When IRA funds are converted and commingled with the original Roth IRA, we track which funds have reached the five-year holding period and which are subject to investment suspension. Marianne M. Nolte, CFP at Imagine Financial Services, said:

And if you inherited a Roth IRA from someone else, must be kept separate from the existing Roth IRA. 

"Inherited Roth IRAs have different tax rules, which govern spouses, minor children. , and some others,” said Katie Cook, financial planner at Abacus Financial Planning.

If you are using a Roth IRA to save money on your child's college education, we recommend that you keep these funds on a separate timeline from your retirement Roth IRA. That way, you can adjust your investment choices based on the timeframe of each goal.

If you have multiple IRAs, consider what your goals are and whether you really need multiple different IRAs to achieve them. Make sure you have a tracking system in place so you don't forget your IRA and go over your contribution limit. You must also update your IRA contact details so that they contain the correct information. 

If you have not already done so, please consult with yourFinancial Planner and ask if multiple IRAs is the correct answer. They may be able to offer alternatives to simplify your finances.

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