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Absolutely, yes you can. There are several reasons why you might want to consider having multiple IRAs.
How many IRAs can you have?
There is no limit on the number of IRAs a person can have. However, there is the overall IRS limit on how much you may contribute per year spread out across your IRAs.
Your total annual contribution limit is limited to one maximum figure across all of your IRA accounts. In 2023, you can contribute a maximum of $6,500 per year ($7,500 if age 50 and older) across your IRAs. If you had two IRA accounts, for example, you could split the $6,500 and deposit varying amounts across accounts, but no more than $6,500 combined.
Investment Diversification
One of the main reasons to have more than one IRA is to diversify your investments. Different types of IRAs have different rules and limitations, so having multiple accounts can give you more flexibility in how you invest your money. For example, you might choose to have a Traditional IRA for pre-tax contributions and a Roth IRA for after-tax contributions. Or, you might have one IRA in which you invest in stocks, bonds, and mutual funds and have a ‘Gold IRA‘ in which you invest in gold bullion and coins. Through proper diversification, you may reduce your overall risk and potentially earn higher returns. Contact a financial advisor to ensure you are properly diversified.
Beneficiary Designations
Having multiple IRAs can make it easier to designate beneficiaries for your accounts. Each IRA requires you to name a beneficiary who will inherit the account if you pass away. If you have multiple IRAs, you can choose different beneficiaries for each account, which can help you customize your estate plan and ensure that your assets are distributed according to your wishes.
Spousal Contributions
If your spouse has little or no income, you are allowed to make contributions on their behalf. This is commonly known as spousal IRA contributions. The same rules apply as those for traditional IRA contributions. Your spouse will have their own IRA account since IRA accounts are not allowed to be held jointly. This allows a family to double the amount of money set aside for retirement.
Here are the requirements for opening a spousal account:
- You must be married and file a joint tax return.
- You must have eligible compensation to make contributions.
- The total contribution for both you and your spouse cannot be more than your taxable compensation reported on your joint tax return.
How to Manage Multiple IRAs
If you do decide to have more than one IRA, it’s important to keep track of your accounts and make sure you’re not exceeding contribution limits. You’ll also need to manage your investments across multiple accounts, which can be a bit more complicated than managing a single account. One option is to use a robo-advisor or financial advisor to help you manage your investments and ensure that you’re meeting your retirement goals.
Conclusion
Having more than one IRA may be a smart way to diversify your investments and customize your estate plan. However, it’s important to make sure you’re managing your accounts effectively and staying within the rules and limitations of each type of IRA. You should consult with a financial advisor to ensure that you’re making the most of your retirement savings and preparing for a secure financial future.
