Can You Have Multiple Roth IRAs?

What Is A Roth IRA?

As we mentioned, a Roth IRA is an individual retirement account that allows you to save money on a tax-advantaged basis. Contributions are made with after-tax dollars, meaning you don’t get a tax deduction for the amount you contribute. However, when it comes time to withdraw your money in retirement, all the investment growth earnings and the original contributions are tax-free.

The Benefits Of Having Multiple Roth IRAs

The good news is that there is no limit to the number of Roth IRAs that an individual can have in their name – the only limit comes from the total contributions that can be made, and this must not exceed the limit set by the government.

Those under 50 can only contribute $6500 in a single year, rising to $7500 for those over 50. Note that this amount changes almost every single year.

Some of the main benefits of multiple Roth IRA accounts include the following:

Diversify Your Investments

The primary benefit of having multiple Roth IRAs is that it allows you to diversify your investments and spread out your risk. By having multiple accounts, you can invest in different types of assets, such as stocks, bonds, commodities, private equity funds, and ETFs. This can help reduce the volatility of your portfolio and give you more control over how much risk you take on.

Access To A Wider Range of Investment Options

Holding multiple Roth IRAs also allows holders to access a wider range of investments, and this can be important in helping you find the best investments for your goals and risk tolerance, as well as allowing you to take advantage of any tax benefits that may be available.

Flexibility On Withdrawals

Traditional and Roth IRAs have different rules regarding withdrawals, and this can make the Roth IRA more appealing for many investors. Any Roth IRA contributions can be withdrawn at any time and for any reason, without incurring any tax-based penalties, making them more flexible and accessible than traditional IRA accounts.

There are also no required minimum withdrawals with a Roth account, while a traditional IRA makes withdrawals mandatory after the age of 72. Finally, having multiple Roth IRAs can also provide more flexibility when it comes to estate planning. You can name different beneficiaries for each account, allowing you to control how your assets are distributed after your death.

This can be especially useful if you have children or grandchildren who may benefit from the tax-free growth of a Roth IRA. Overall, having multiple Roth IRAs can be a great way to diversify your investments, access a wider range of investment options, and enjoy the tax benefits associated with them.

The Downsides Of Having Multiple Roth IRAs

In addition to the numerous benefits, it is also important to be aware of the potential downsides of having multiple Roth IRAs, and some of these can include:

Increased Complexity

Having multiple accounts increases your workload and can make it more difficult to keep track of your investments. You will need to monitor each account separately and ensure that you are making the right decisions for each one, and this can massively increase the amount of paperwork and red tape that you have to deal with.

Higher Fees

Having multiple accounts can also mean that you are paying more in fees, as each account will incur its own set of charges. This can add up over time and reduce the overall return on your investments, so it is important to be aware of any fees associated with each account before you open one.

More Complicated Estate Planning

Finally, having multiple accounts can also make estate planning more complicated. You will need to ensure that each account is properly documented and that the right beneficiaries are named for each one, and this can be a time-consuming process.

How To Open A Roth IRA?

If you are interested in opening a Roth IRA, the first step is to find an investment provider that offers them. There are many different providers available, so it is important to do your research and compare the fees and features of each one before making a decision.

Once you have chosen a provider, you will need to open an account and make your initial deposit. You can then start investing in the funds and stocks of your choice, and you can also set up automatic contributions to ensure that you are making the most of your investments.