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Owning More than One IRA: Sometimes a Great Idea

Published June 6, 2017 by Brady Cobin Law Group, PLLC

If you are prone to over-organization, then the idea of owning multiple IRAs will appeal to you.

IRAs are the cornerstone of many people’s retirement strategies. They were designed that way, offering attractive tax breaks that working people appreciate. Did you know that there are no restrictions on the number of IRAs that you can own, and that there are a number of different IRAs? Here’s what you need to know to develop an IRA strategy

One reason for having multiple IRAs is to take advantage of both Roth and traditional IRA rules and to use both direct contributions and rollover transactions to boost your retirement nest egg. Motley Fool’s recent article asks “Can I Own More Than 1 IRA?

If you choose to have both a traditional IRA and a Roth IRA, you must keep them in separate accounts—which is a good reason to own two different IRAs. A traditional IRA provides an upfront deduction on contributions, and the Roth IRA gives tax-free growth to most retirement savers.

Withdrawals from traditional IRAs are included in taxable income, but not with Roth withdrawals.  Therefore, you have the flexibility to take distributions and control your tax liability in the best way possible.

In the past, keeping rollover IRA money separate from contributory IRAs was important in order to maintain the ability to move the rollover money back into a 401(k) at a current or future employer. The old laws didn’t allow commingling of rollover and non-rollover assets.  However, now the rules preventing those movements have been eliminated, making it less critical to keep a separate rollover IRA from your regular contributory IRA. Nevertheless, many still find it valuable for tracking purposes—and some state creditor protection laws can provide additional benefits if you keep money that initially came from an employer plan separate from your ordinary IRAs.

Another advantage of multiple IRAs is that you can use a different financial provider for each one, particularly if you have specific mutual funds or other investments that you like.

Finally, when looking at IRAs and estate planning, there are circumstances where having multiple IRAs will be necessary or keep things simple.

You might also want to open multiple IRAs and list different beneficiaries for each account, so that you can customize the amount of money each beneficiary will receive, as well as the assets they’ll get.

An experienced estate planning attorney will be able to speak with you about the different kinds of IRAs and figure out how they might work for you during retirement and as part of your estate plan. It may be that you only need one, but there may be some options you don’t want to overlook.

Reference: Motley Fool (May 9, 2017) “Can I Own More Than 1 IRA?

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