Multiple IRAs: A Complete Guide to Managing Different Retirement Accounts

How many IRAs can you have? The straightforward answer is: as many as you want. Unlike contribution limits, which cap how much money you can put into your retirement accounts each year, there’s no restriction on the actual number of individual IRA accounts you can open. However, this freedom comes with both significant benefits and practical challenges that every investor should understand before opening multiple IRAs.

Understanding the Contribution Limits Across Multiple IRAs

When it comes to multiple IRAs, the key constraint isn’t the number of accounts—it’s the annual contribution cap. In 2023, the IRS allows you to contribute up to $6,500 to IRAs across all accounts combined (or up to $7,500 if you’re 50 or older with catch-up contribution eligibility).

This means you could theoretically split these contributions between two, three, or more accounts. For example, a 55-year-old investor could allocate their $7,500 annual limit by putting $4,000 into a traditional IRA and $3,500 into a Roth IRA at different institutions. The total across all IRAs is what matters—not how you distribute it.

While you could open a new IRA with a different company every year, doing so becomes logistically impractical. Managing multiple passwords, account balances, and annual tax paperwork multiplies the administrative burden significantly.

The Case for Multiple IRAs: Key Advantages

Insurance Protection and Asset Safeguarding

One of the most compelling reasons to maintain multiple IRAs is enhanced protection through insurance coverage. Different custodian types offer different protections:

FDIC Insurance Coverage: If your IRA custodian is a bank, FDIC insurance covers up to $250,000 in deposits per account at each institution. Having both a Roth IRA and a traditional IRA at the same bank means $250,000 total coverage. But if you split them between two banks, you can have $500,000 in total FDIC protection. For those with substantial retirement savings, this geographic diversification becomes strategically valuable.

SIPC Protection: Brokerages like Fidelity, Vanguard, and Schwab provide SIPC insurance covering up to $500,000 per person per account type per institution. This protection applies even if the brokerage faces financial difficulties—though it doesn’t cover investment losses from market downturns.

Fraud Prevention and Account Security

While most people trust their family members, life circumstances sometimes create temptation. Having multiple retirement accounts at separate institutions makes it harder for anyone—intentionally or accidentally—to access and liquidate your entire retirement nest egg through a single account compromised by fraud or hacking. If one account experiences suspicious activity and gets frozen during investigation, your other accounts remain accessible.

Strategic Tax Planning

No one knows their exact tax bracket in retirement. By maintaining both a traditional IRA (which offers tax-deductible contributions but taxable withdrawals) and a Roth IRA (which offers tax-free growth and withdrawals), you create flexibility around future tax liability. This becomes particularly valuable if you’re pursuing a backdoor Roth strategy, which requires having both account types available.

Managing Required Minimum Distributions

Traditional IRAs require you to take Required Minimum Distributions (RMDs) starting at age 73. Roth IRAs have no RMD requirement during your lifetime. For investors with substantial assets and multiple income sources, maintaining a Roth alongside a traditional IRA provides flexibility. Those planning ladder conversions from traditional to Roth benefit from having multiple accounts—converting in small tranches across several years avoids a massive tax bill in a single year.

Investment and Asset Class Flexibility

Not all financial institutions allow self-directed investments like real estate or alternative assets within an IRA. If you want to maintain broad diversification—keeping some money in a standard brokerage account while exploring self-directed options—multiple IRAs at different custodians provide this flexibility. You might keep your stock and bond portfolio at a major brokerage while opening a self-directed IRA for alternative investments.

Early Withdrawal Advantages

Roth IRAs allow penalty-free withdrawals of contributions (not earnings) at any age. Traditional IRAs penalize withdrawals before age 59½. Having both account types gives you tactical flexibility if you need emergency funds during your working years—you can access Roth contributions without tax consequences while preserving your traditional IRA for later.

Inheritance Simplification

When you pass away, your IRAs transfer to named beneficiaries. Traditional IRA inheritors face 10 years to liquidate the account and manage significant tax planning. Roth IRA inheritors get tax-free distributions over the same 10-year period. Having separate accounts allows you to structure different accounts for different beneficiaries, simplifying their post-inheritance tax situations and potentially reducing family conflict.

The Drawbacks: When Multiple IRAs Create Problems

Administrative Complexity and Management Burden

The primary disadvantage is straightforward: more accounts mean more passwords to remember, more balances to track, more statements to review, and more year-end tax paperwork. For investors who prefer simplicity or those who anticipate cognitive changes with age, this overhead becomes a genuine burden. If you’re planning to rely on family members to help manage your finances, they’ll likely prefer consolidating to fewer accounts.

RMD Calculation Mistakes and Penalties

RMDs are calculated based on your total traditional IRA balance across all accounts. Forgetting to include one account or using an incorrect balance can result in a costly 25% penalty on whatever you should have withdrawn. The more accounts you maintain, the higher your risk of calculation errors.

Unnecessary Fee Exposure

While many custodians offer free IRA accounts, some charge annual maintenance fees unless you meet certain thresholds (minimum balance requirements, electronic statement delivery, etc.). Additionally, larger account balances often qualify for cheaper expense ratios on certain investments. Consolidating multiple IRAs might lower your overall investment costs.

Asset Allocation Blind Spots

Tracking your total asset allocation across multiple IRAs at different institutions requires manual calculation—unless you use specialized portfolio management software. Many investors end up with unintended imbalances: too much stock exposure when they meant to be conservative, or insufficient equity exposure when they wanted growth. Rebalancing across fragmented accounts also becomes more cumbersome.

The Bottom Line on Multiple IRAs

Having multiple IRAs makes sense for investors willing to manage the added complexity in exchange for insurance protection, tax flexibility, and strategic planning benefits. For most people, maintaining at least two IRAs—one traditional and one Roth—offers more advantages than drawbacks.

However, if simplicity is your priority, if you want to minimize administrative burden, or if you’re concerned about tracking RMDs correctly, consolidating to a single account at a financially sound institution is perfectly reasonable. The flexibility to have multiple IRAs is valuable, but that flexibility only creates real benefits when you actively manage it with intention.