Can I Have Multiple Roth IRAs?

    by Benjamin Aronson
Updated August 22, 2022

Putting aside money for your retirement is always a good idea. Retirement is one of the biggest goals in life and therefore should be taken seriously. One of the most common ways to save for retirement is through Roth IRAs.

In this article, we will go into a brief understanding or Roth IRAs. In short, Yes its perfectly legal having multiple Roth IRA accounts. We will explain the advantages and setbacks of holding more than one Roth IRA. read on to find out!

Roth IRAs

Established in 1997, Roth IRAs is a tax-advantaged retirement savings account.

Roth IRAs are very similar to Traditional IRAs with a few distinctions.

Funding

First off, Roth IRAs are funded with after taxed money, differing from Traditional IRAs which are generally funded with pre-taxed income.

Tax

Contributions to Roth IRAs are not tax-deductible, whereas contributions to Traditional IRAs are tax-deductible.

Withdrawl

Withdrawing funds from a Roth IRA account is tax-free, in contrast to Traditional IRAs where you usually pay tax upon withdrawing money from the account during retirement.

Can you Have Mulitple Roth IRAs?

You can have more than one Roth IRA account.

The main difference in Roth IRA accounts from other saving accounts is that you can withdraw funds from a Roth IRA at any time (specific tax rule apply depending on the state). Reason being, you were already taxed on the money before opening the account.

As an account holder, you will not be taxed when money (including earnings) is withdrawn if you have been making contributions to the account for at least  5 years and 59 ½ years of age or above.

If you don’t apply to the rules above and take money out of a Roth IRA account, you will be penalized with an additional 10% tax on earnings (unless special exception).

It is important to note that Roth IRAs are subjected to an annual limit.

In 2019- $6,000

  • Over the age of 50, $7,000

Multiple Roth IRA Advantages

  • Having multiple Roth IRA accounts is just like having multiple bank accounts. You can save for different things.
    • Roth IRA dedicated to retirement trave.
    • Roth IRA dedicated to retirement savings.
  • Multiple Roth IRA accounts diversifies your investment.
    • You might be able to lessen the risks from a more diverse portfolio.
  • Simply dividing up monies
    • Possibly saving money for children, keeping potential inheritance separate.

Multiple Roth IRA Setbacks

  • It might be more simple having one account.
    • Managing multiple accounts can be confusing.
  • Fees.
    • Multiple accounts mean multiple fees for each Roth IRA account.
    • Double the amount of work during tax reporting.
  • Roth IRA limit.
    • No matter how many Roth IRA accounts, the limit is $6,000
    • Unless you have a specific situation to separate.
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