How Many Roth IRAs Can I Have?

Here’s why you may want more than one

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Roth IRAs are tax-advantaged individual retirement accounts that allow investors to save for retirement with post-tax money without any further tax liability. Roth IRAs have a $6,000 annual contribution limit (plus an extra $1,000 if you’re age 50 or older), and you can invest the funds in any stocks or bonds supported by the institution where you open the account.

There’s no limit to how many Roth IRAs you can have, but opening multiple accounts won’t change the annual contribution limit. Depending on your situation, there may be some good reasons to open multiple Roths—and some potential challenges.

Key Takeaways

  • You can open as many Roth IRA accounts as you want, but your contributions are still capped by the annual limit.
  • Opening multiple Roth IRAs could make it easier to pursue several different investment strategies or to assign different beneficiaries to each account.
  • However, it can make it difficult to keep track of contributions to multiple accounts, and contribution errors can result in penalties from the IRS.

You Can Have as Many Roth IRAs as You Want

There’s no limit to the number of Roth IRAs you can open during your lifetime. Each IRA can have a different custodian (or financial institution) and beneficiary, and each account can hold different investments and pursue different strategies. While opening multiple Roth IRAs would allow you to diversify your portfolio and easily choose how your investments will be divided up after your death, there are some downsides to having multiple accounts.

Downsides To Opening Multiple Roth IRAs

The main downside to opening multiple Roth IRAs is that it can get confusing. “From the IRS' perspective, you only have one Roth IRA, no matter how many different IRA custodians you have money with,” said Steve Burkett, a Certified Financial Planner with Palisade Investments, in an email to The Balance. “[It] doesn't make much sense to have more than one Roth IRA custodian, and this could cause tracking/contribution errors.”

If you don’t keep close track of which funds you contributed to which accounts at which times, you could be penalized for violating the Roth IRA 5-year rule, even if it’s an accident. The rule states that you can only make qualified distributions (which aren’t taxed or penalized) of investment earnings if the cost basis for the earnings has been in the account for at least five years.

Additionally, if you choose to have multiple accounts to use different investment strategies, you might accidentally overweight one strategy by contributing to the wrong account.

If you have multiple retirement accounts and wish to consolidate them into one Roth IRA, you can do that by rolling over the amounts. You may face tax liabilities if you’re rolling over a traditional IRA or other non-Roth account.

When It Makes Sense To Have Multiple Roth IRAs

If you can stay organized and keep your contributions within the annual limit, there may be situations in which it may make sense to open multiple accounts.

“If different custodians offer you different types of investment strategies, this could be a reason to use multiple custodians,” Burkett said. This point particularly applies to custodians that offer specialized services. For example, if you want one Roth IRA to be actively managed by an investment manager and another to only own Vanguard funds, you could open two separate accounts.

Another reason to open multiple Roth IRAs is to differentiate the accounts you’ll leave to multiple beneficiaries. “Multiple Roth IRAs makes sense in cases where you want to separate the beneficiaries of those accounts,” explained Certified Financial Planner Brandon Opre to The Balance via email.

Unless the beneficiary is the account holder’s spouse, Roth IRAs are typically converted to inherited IRAs before passing to the beneficiary.

If you want to leave your savings to multiple beneficiaries, opening a new account for each one is one way to make it easier to process. “Especially if you want to leave an IRA to a charity, [you could] designate one Roth IRA to go directly to a charity, [and] the others can go to family members or whomever,” said Opre. “It helps make processing smoother, and the custodian of the investments does not have to worry about splitting the investments into fractions.”

Other Common Roth IRA Mistakes

Mistakes made in Roth IRA contributions or investing can be very costly in both the long run (by reducing investment gains) and the short run (by incurring IRS penalties). Here are a few other common Roth IRA mistakes you should avoid.

Tax-Advantaged or Low-Yield Investment Choices

Funds invested in a Roth IRA grow without taxes. If you invest your Roth in municipal bonds that are tax-advantaged or in low-return assets, you won’t be getting the best bang for your buck.

Let’s say you want to diversify by buying both a high-growth equity and a bond with a 3% yield, and you plan to buy one in your Roth IRA and the other in a different account. If you buy the bond in the Roth, you won’t have to pay taxes on the 3% yield. If you buy the equity in the Roth and it goes up 500%, you won’t have to pay taxes on that far larger gain.

Nonqualified Withdrawals

Distributions of investment earnings (not cost basis) from your account can only be made if you meet strict requirements. First, the cost basis must have been invested for five years. In addition, you must meet at least one of a number of criteria, including:

  • Be at least age 59 ½
  • Qualify as diabled
  • Be using up to $10,000 of the funds toward the purchase of your first home

If you withdraw investment earnings that aren’t qualified to be withdrawn, you must pay a 10% additional tax.

Excess Contributions

The annual contribution limit for a Roth IRA is $6,000 ($7,000 if you’re age 50 or older), and this amount applies to your combined contributions if you open multiple accounts.

If you contribute more than the annual limit, even if it’s by mistake, the IRS charges a 6% penalty each year the excess Roth contribution stays in the account.

Not Contributing to Your Spouse’s IRA

If you’re married and file jointly, you and your spouse can contribute to each other’s Roth IRAs—even if only one of you earned taxable income. The total contribution amount for a married filing jointly couple is double that for a single person: $12,000, plus an additional $1,000 for each person age 50 or older. As long as your joint tax return shows that you had at least that amount in taxable compensation, either of you can contribute to Roth IRAs in both of your names.

Frequently Asked Questions (FAQs)

When were Roth IRAs created?

Roth IRAs were authorized by Congress through the Taxpayer Relief Act of 1997. The accounts are named after former Senator William Roth, a Republican who represented Delaware and sponsored the legislation that created this new type of retirement account.

How do the funds in Roth IRAs grow?

The funds in a Roth IRA grow based on how they’re invested. If they’re invested in bonds, they’ll grow based on income from the bonds. If they’re invested in stocks, they’ll grow based on dividends and capital gains.

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Article Sources

  1. IRS. “Retirement Topics - IRA Contribution Limits.”

  2. IRS. “Publication 590-B (2020), Distributions From Individual Retirement Arrangements (IRAs),” see “What Are Qualified Distributions?”

  3. IRS. “Publication 590-B (2020), Distributions From Individual Retirement Arrangements (IRAs),” see “Additional Tax on Early Distributions.”

  4. IRS. “Retirement Topics - IRA Contribution Limits,” see “Tax on Excess IRA Contributions.”

  5. IRS. “Publication 590-A (2021), Contributions to Individual Retirement Arrangements (IRAs),” see “Kay Bailey Hutchison Spousal IRA Limit.”

  6. Congressional Research Service. “Traditional and Roth Individual Retirement Accounts (IRAs): A Primer,” Page 13.