IRAs can be a terrific way to make the most of what you save for retirement. They also have some tax breaks that outweigh regular investing accounts. There's no restriction on the number of different IRAs you can have, and you can open as many IRAs as you like.
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.
Remember, it’s OK to have only one IRA, but there are several reasons why you should consider multiple IRAs.
Reference: Motley Fool (May 9, 2017) “Can I Own More Than 1 IRA?”
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