Retired Couple

You may be wondering how many Roth IRAs you can have. The answer is, that it depends. You can have multiple Roth IRA accounts, but you can only contribute a certain amount each year. In this blog post, we will answer all of your questions about Roth IRAs and give you some tips on how to make the most of them. Keep reading to learn more!

Traditional IRA vs Roth IRA

Let’s start by looking at the differences between a traditional IRA and a Roth IRA. A traditional IRA is an individual retirement account that allows you to contribute pre-tax dollars. This means that your contribution is not taxed in the year you earn the income. A Roth IRA is an individual retirement account that allows you to contribute after-tax dollars. This means that your contribution is made after the taxes are taken out from your income.

There are some key differences between these two types of accounts. With a traditional IRA, you will have to pay taxes on your withdrawals in retirement as an income. With a Roth IRA, your withdrawals are generally tax-free and penalty-free after the age 59 1/2.

The biggest difference between these two types of accounts is that with a traditional IRA, your money can grow tax-deferred. This means that you will not have to pay taxes on your investment gains until you make withdrawals in retirement. With a Roth IRA, your money can grow tax-free. This means that you will not have to pay taxes on your investment gains at all.

Now that we know the difference between these two types of accounts, let’s answer the question: can you have multiple Roth IRAs?

Can You Have Multiple Roth IRAs?

The answer is yes, you can have multiple Roth IRAs. There is no limit to the number of accounts that you can open. However, there are limits to how much you can contribute each year. For 2022, the contribution limit is $6000 for individuals and $12000 for couples.

If you are over the age of 50, you can contribute an additional $1000 to your Roth IRA each year. This is called a catch-up contribution.

Please note the total contribution limit for the year applies to all your contributions to all IRA accounts, both traditional and Roth. For example, if you are under the age of 50, you may choose to contribute $2000 to your traditional IRA and $4000 can be split across your multiple Roth IRA accounts. This way you stay within the $6000 contribution limit.

What are the Benefits of Multiple IRAs?

Opening multiple IRA accounts give you many benefits. Some of them are listed below. These benefits accrue whether you have a Roth IRA or a traditional IRA.

You can Invest with Different Strategies in Different IRAs

You may decide to use index funds in one IRA while in the other you can choose to invest in stocks. Or you may decide to keep short-term investments in one IRA that you intend to withdraw soon after turning 59 1/2, while in another IRA you buy long-term investments that you want to keep until you are 70 years old. Having these strategies separated by accounts can give you a more well-rounded portfolio.

You can Diversify Your Investments

When you have multiple IRAs, you can spread your investments across different asset classes. This can help to lower your overall risk. For example, if you had all of your money in the stock market, a bear market can depress the value of your portfolio. However, you may have invested in Real Estate, Art, Wine, or some other uncorrelated asset class that may continue to show robust growth.

This can be important as many IRA custodians specialize in one or few asset classes. If you wish exposure to different asset classes you will need to consider establishing separate IRAs at different institutions.

You can Reduce the Risk of a Custodian Defaulting

The risk of a financial institution becoming bankrupt is rare but not unheard of. When this happens, your life savings can be at risk. By having multiple IRAs with different financial institutions, you can spread the risk and reduce the likelihood of losing all your retirement savings.

These are just some of the benefits of having multiple IRAs, including Roth IRAs. As you can see, there are many advantages to spreading your retirement savings across multiple accounts.

What are the Disadvantages of having Multiple IRAs?

Having multiple IRAs require more paperwork in opening accounts as well as maintaining them over the years. Additionally, you need to carefully track your contributions and withdrawals each year to stay within compliance. It can also add an additional burden to your beneficiaries if they have to deal with multiple IRA accounts and custodians.

Despite these disadvantages, the advantages of having multiple IRAs can outweigh the negatives. Ultimately, it is up to you to decide if having multiple IRAs makes sense for your retirement planning.

If you have any questions, please consult with a financial advisor. They can help you determine if having multiple Roth IRAs is right for you and your retirement goals. Thanks for reading!

Do you have multiple Roth IRAs? What are the benefits that you have found? Let us know in the comments below.

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