How many retirement accounts can you have? Earlier this week a reader asked me this same question, and I promised a response. The specific question regarded owning both Traditional and Roth IRAs, and whether or not having an employee sponsored 401(k) plan would affect her eligibility for those accounts. The answer is yes, you can have both types of IRAs, and no, your 401(k) plan doesn’t affect your eligibility to contribute to an IRA. Here are some more detailed answers:
Can You Have Both a Roth and Traditional IRA?
You can have multiple retirement accounts.
Yes. You can own both a Roth and Traditional IRA, and you can contribute to both in the same tax year. The important thing to remember is that you cannot contribute more than the maximum contribution limit across all IRA accounts in any given tax year. (More information comparing Roth vs Traditional IRAs). Depending on your income level, the max IRA contribution limit is $5,500 ($6,500 if you are over 50).
Can You Have More than one IRA?
Yes, you can open multiple IRA accounts and they can be held with multiple companies. Again, remember not to contribute more than the contribution limit across all IRA accounts in a given tax year. You can also have one IRA account with multiple investments within the account. This makes it easier to diversify your retirement holdings and maintain easier control over your account administration. Here are tips for maximizing your IRA contributions each year.
Can You Have More than one 401(k) Account?
Yes. A 401(k) plan is an employer sponsored retirement plan. When you leave your job, you have to make decisions regarding your old 401(k) plan. You will need to decide whether to leave the assets in place (if allowed by your former plan’s rules), roll over the assets into an IRA, roll the assets into a new 401(k) plan, withdraw the assets in a lump sum, or transfer the assets into a qualified annuity. For more detailed information, read about your options for your 401(k) when leaving your job. Note: Don’t exceed the max 401k contribution limits if you change jobs within a calendar year! Be sure to take previous contributions into account when setting your deferred contribution.
What About other Retirement Plans?
There are many other retirement plans out there including SEP-IRAs, SIMPLE IRAs, solo 401(k) plans, annuities, and more. As a general rule of thumb, you can have multiple accounts for these as well. Keep in mind there may be eligibility, contribution, and income requirements associated with these types of accounts, so you should do a little more research before opening new accounts. Here is a little help to get you started: comparing 401(k) plans and IRAs.
Pros and Cons of Multiple Retirement Accounts
Fewer accounts is usually easier to manage. For most people, consolidating retirement accounts is the best plan because it is easier to manage asset allocation, fees, withdrawals, taxes, paperwork, account questions, and transferring assets to beneficiaries. Many people choose to manage their accounts with a well known fund companies such as Vanguard, Fidelity, T. Rowe Price, or with discount brokers such as TD Ameritrade, E*Trade, or TradeKing.
There can be advantages of owning multiple retirement accounts, however. A good example of this would be if you had a 401(k) plan that had investment funds or low management fees that you couldn’t match elsewhere. If your current investment is better than what you can get somewhere else, there is no need to consolidate it just to reduce a small amount of paperwork.
My Current Retirement Accounts
I currently have a Roth IRA (with several different funds in it), two 401(k) plans, and an account with the Thrift Savings Plan (TSP) (government version of a 401(k)). I could roll my old 401(k) plan into my new one, but I haven’t decided whether or not to do that yet. I can also roll over my TSP account into a 401(k) plan or IRA, but there is a special provision that allows military members who receive tax free combat pay to contribute tax free funds to their TSP account. TSP contributions are normally pre-tax contributions and are taxed upon withdrawal, but the portion of the contributions I made while in a tax free zone can be withdrawn tax free as well. I would lose the tax free withdrawals if I transferred my TSP funds into a different account.
Note: Please keep in mind, this is general information. There may be other factors that affect how much you can contribute or which accounts you may be eligible for. Some of these factors include income level, type of employment, employer sponsored retirement plans and more.
Related Articles:
- Year End Retirement Plan Moves
- Traditional and Roth IRA Contribution Limits
- What if You Contribute Too Much to a Roth IRA?
- 401k Plan Contribution Limits Increase for 2013
- 529 College Savings Plan vs. Coverdell ESA
{ 39 comments… read them below or add one }
Would you please add a section about over contributing to an account during a fiscal year.
Ryan,
That’s a great idea, but I think it would flow better if I wrote that in a separate article.
deepali, you’ve got quite a few retirement plans! You might consider consolidating a few of them if the fees aren’t too much. It’s easier keeping track of everything when it is under one roof.
Good sum. I have 2 403bs, 1 401k, 2 Roth IRAs, and 2 Trad IRA. Actually, I think there is another Roth and another Trad somewhere.
I have the just the TSP now, but once I can get out from under this pile of debt I racked up I am going to start a Roth.
This is a good informative post. I just want to add that your contribution could be limited by how much you make. For instance, my parents can only contribute to Roth IRA, but not traditional.
What are the actual limits for this?? i am getting different numbers from different sites.
Thanks for the help.
Pinyo, I think you have it backwards. There are no restrictions on a traditional, but a Roth is restricted to those making under $183000.(Those who file jointly)
Good point, Pinyo. I’ll make sure that is in there.
thanks for helping me earlier this week, and for posting this! you clarified a lot for me
Great read! As Pinyo pointed out, all have limitations (earnings and contributions). If you are close, you need to understand where the edge is.
Best Wishes,
D4L
my husband has a roth ira, a 40lK where he works full time. He also works at his own business and has a sep. My question is. Can he transfer this sep (in mutual fundsnow) to a brokerage firm and invest in the stock market, get in and out without paying taxes until retirement?
Diane: As long as your husband’s SEP IRA remains in a SEP, he can change the allocation without paying taxes. HE would only have to pay taxes on it if he withdraws the funds.
Regarding multiple retirement plans, can I contribute pre-tax contributions to a company sponsored SIMPLE and have the company fund 403b contributions at the same time? We are part of a 501c3 nonprofit organization.
Mark: Thank you for contacting me. I know you can have these plans at the same time (for example if you have an account from a previous employer). However, I do not know whether or not you can contribute to both of these from the same employer in the same year, or what your contribution limits would be. I recommend contacting your plan administrator. I’m sorry I couldn’t be of more assistance.
I am age 56. I have 2 different full-time employers. One has a simple IRA with match, and the other has a 401k offered with a match. My income, married, for the jobs combined is 250,000. How much will I be allowed to put in these accounts?
Philip: I am fairly sure you can contribute to both accounts, but I am not certain how much you can contribute to them. I recommend contacting a CPA or speaking with your HR rep for more information.
After reading the article; I can have multiple IRA accounts, but if I 2 Trad IRA accounts can I contribute 5K in each or just 2,500 each for the max of 5K. I understand why the gov’t wouldnt want me to do this with a Roth but their going to get their tax’s in the end no matter what.
What do you think about a gold backed IRA?
Kellie: I can’t recommend any specific investments. I only recommend that people research which asset allocation they feel is the best for their needs and their risk tolerance. Best of luck.
Can i deduct my contribution to an ira account in ny tax return if i have a 401k plan at work?
You can deduct contributions to a Traditional IRA in addition to contributions to a 401k so long as you meet income requirements and don’t exceed contribution limits.
Source: http://www.irs.gov/publications/p590/ch01.html
Concerning IRA accounts, am I correct in that I cannot contribute more than $5000 total per taxation year, spread across all of my IRA accounts?(I am less than 50 years of age) So to clarify, I cannot open two accounts and contribute $5000 to each of them in the same year, correct?
Thanks,
Luke
That is correct, Luke. Also, Traditional and Roth IRAs have the same contribution limits and you can only contribute $5,000 to these accounts. So if you wanted you could contribute $2,500 to a Traditional IRA and $2,500 to a Roth IRA. Most people prefer to stick with one type of IRA though.
Here is more information to get you started:
Best of luck!
I am 53 and retired from the Air Force a year ago. I make about $34,000 a year in retirement pay. May I contribute to an IRA using my retirement pay?
Hello, I have a 401K a 459 plan ,pension,Roth IRA and mixed stocks and bonds. Would it be a good idea to keep my current 401K as it is and open a roth 401K and start contributing to that to save on the tax hit later on?
Madmaxx, Each person has a different financial situation, and I cannot comment on the best course of action for you. I recommend speaking with a professional financial planner, who can help you understand the variety of investing and tax issues that your situation warrants.
What are the rules regarding 60-day rollovers with multiple accounts? Can I do a 60-day rollover on account A in January and Account B in March and Account C in May? If so, consolidation might not be such a hot idea. You could have 6 accounts and borrow on one of them at any time.
Alan, I’m not sure.
Having a Roth IRA account and a seperate Roth 401K account, do the limits intertwine with each other or are they totaly seperate limits?
Entirely separate, Jim.
I have an employer sponsored simple IRA with match that I am currently contributing the max limit (11.5K). Can I have a separate traditional or Roth account and contribute the full 5K?
I am confused about the amount you are allowed to earn as a salary/Commision and still contribute into a ROTH IRA or Trad IRA. I read that the threshold is 90k and then i read it was 105K and then 120K. Can someone please clear this up for me??? Whats the point that having this type of account is not productive. Would it just be better to max out my 401K? or do both???
I am currently in my early 30′s and don’t have much tax shelter. I wanted to contribute to an IRA so that i could lower my tax bracket.
AND if you make too much isn’t it just better to put the month into a investor acccount and buy lets say Mutual Funds.
I apologize in advance, i am pretty new to investing only been doing it for about 3 years. THANK YOU for the help in advance.
I have a question on the opening of a SEP..
Client opens a SEP IRA (S Corp – 2 owner operators) in 2010 – Original document indicates 1 year for employee eligibility.
Client hires another employee in 2010 – and is now not so happy with their current SEP Provider.
Client wants to open another SEP in 2011 with another Provider and Have a 3 year Eligibility requirement so that the owners can fund in 2011 (as they have been employed the 3 years necessary 2009, 2010 and 2011) and not have to fund for new employee in 2011 – They understand they will have to in 2012.
Question – Can this be done?
I have done some research and I am not clear on this – Any ideas? I appreciate your help.
Thanks.
David, I recommend contacting a financial planner or small business advisor in this situation.
Question -
I own multiple LLCs and I am the owner and only employee. I would like to set up a SEP IRA for myself this year. I understand the total allowed is 25% or $49,000 and that is the max per person. However, let’s say Company A made $170,000 in profits. I can put in a maximum of $42,500 in the SEP IRA from that company.
Now, what do I need to do to put in another SEP IRA from another company to make up the $6,500 ? Example, my Company B made $150,000, putting in 25% from it would put me over the $49,000 limit per person. Do I just fill out another SEP IRA form and put down $6,500 from Company B?
That way Company A’s contibution is $42,500 and Company B’s contribution is $6,500 – making the total $49,000 for me. The max allowed per year.
I hope that makes sense. Since one company did not make over $200,000, I need to use multiple companies that I own to make sure I claim the full $49,000.
Thanks!
JWP
JWP, to be honest, I’m not 100% certain. I recommend speaking with a tax professional if you use one to file your taxes, or speak with your IRA provider, as they may be able to help you better understand your options.
What if you are working for 2 companies and have 2 401k plans? How would the cut work at $17,500?
Steve, the limit is $17,500 shared across both plans. You can split it up however you like. I recommend contributing the minimum to get an employer match for both companies (if available), then contributing the rest to the plan with the best investment options or the lowest expense ratios. The primary consideration is not to exceed the maximum contribution limit with your contributions. (the contributions from an employer match do not count toward your $17,500 limit).