There are several types of individual retirement arrangements, also known as IRAs, and over 60 million IRAs being held in the U.S. IRAs are tax-advantaged and help individuals save for retirement, so many ask the question: How many IRAs can an individual have at once?
Quality Over Quantity
This question has a simple answer:
- An individual can have as many IRAs as they want.
- However, your annual contribution limits are fixed no matter how many accounts they’re spread across.
In 2021, individual taxpayers could contribute up to $6,000 per year to their IRA(s). That means they could:
- Contribute $6,000 to a single IRA
- Or split their $6,000 contributions into as many accounts as they want
Regardless, the allowed contribution remains the same per individual, not per account.
With this in mind, it makes sense to shift focus back towards retirement investment goals. While opening new IRAs doesn’t change the amount that is able to be placed in tax-sheltered retirement accounts, it can still be useful for adding diversity to a retirement portfolio.
Each type of IRA offers unique tax advantages.
Having more IRAs can lend to the diversity of a retirement portfolio by adding new assets. IRAs can be used to invest in several different assets, including:
- Stocks
- Bonds
- Exchange-traded funds
- Precious metals
- Cryptos
Some of these options require you to open a new account to segregate your new assets. For example, if you want to diversify your retirement portfolio to include cryptocurrencies, you will need to find a provider of Crypto IRA accounts.
Traditional IRA and Roth IRA
With a traditional IRA, an individual contributes pre-tax dollars and receives a tax deduction for doing so. Then, they pay regular income tax when taking distributions from the Traditional IRA in retirement.
Roth IRAs are funded with post-tax dollars. This means that an individual pays taxes on earned income, then contributes to a Roth IRA. Distributions taken from a Roth IRA in retirement are tax-free with some exceptions.
Roth IRAs have their own utility. For some people, it may be preferable to pay taxes now and not worry about them after retirement. Contacting a tax professional can provide more insight into the potential uses of Roth IRAs.
Crypto IRAs
Crypto IRAs are a type of alternative asset IRA that allow for tax advantages on cryptocurrency investing within a retirement account. Enabling tax-sheltered growth of cryptocurrency assets for retirement, a Crypto IRA can exist in the form of a Traditional IRA, SEP IRA, or Roth IRA.
The Benefits of Having Multiple IRAs
Imagine you just want to diversify your retirement portfolio with cryptocurrency investments, as mentioned above. In this case, you could dedicate a part of your contribution limit to cryptocurrency investments. Opening a separate IRA for cryptocurrency investments is easy and enables you to diversify your nest egg.
Contribution Limits When You Have Multiple IRAs
Filing Single
- Under 50 y/o – $6,000 per individual, not per account. – Over 50 y/o – $7,000 per individual, not per account.
How to Decide If Having Multiple IRAs is Right for You
The decision to open multiple IRAs should be based on your personal financial considerations. The investments you make for retirement now could significantly impact your retirement goals. It’s crucial to consider the potential benefits of opening another IRA.
