Can Individuals Have Multiple Roth IRA Accounts?

Unlike other individual retirement accounts, Roth IRAs only accept after-tax contributions so that you pay taxes on your money now instead of when taking distributions after retirement. Some IRA contributors may wish to create multiple Roth IRA accounts for different purposes, dividing their annual contributions among the accounts. This is allowed by the IRS, though there is an overall limit on how much you can contribute per year.

Multiple Roth IRAs

Creating multiple Roth IRA accounts is possible, although the IRS views your combined Roth IRA holdings as though they were in a single account. The separate accounts simply allow you to micromanage your retirement funds more directly. You can create a Roth account that you intend to use as your primary retirement income, another account to cover travel expenses during your retirement and a third to supplement insurance or cover other unexpected expenses. When reporting contributions to these separate accounts on your taxes, however, they will be reported together as IRA contributions in general instead of contributions to separate IRAs.

Choosing Custodians

When creating additional Roth IRA accounts, you have the option to use a different custodian than the one who holds your primary Roth IRA account. This not only assists you in separating the accounts but also allows you to shop around for better account terms each time you create a new account. At the end of each year, each custodian will provide you with a 1099-R form and may provide other IRA documentation as well. You will use these forms when filing your taxes to report your IRA contributions to the IRS.

Contribution Limits

Even if you maintain multiple Roth IRA accounts with different custodians, the IRS limits the total amount that you can contribute to IRA accounts per tax year. This limit also includes contributions to traditional IRAs, preventing potential abuse of IRA contributions as a means to offset taxes. As of the 2012 tax year, contributions of up to $5,000 (or $6,000 for those over 50 years of age) can be made across your IRA accounts though this amount will increase to $5,500 ($6,500 for individuals over 50) for the 2013 tax year. Contributions in excess of this amount are subject to tax penalties at a rate of 6 percent per year for the time that the excess amount remains in the account.

Rollovers and Conversions

Rollovers from other retirement plans or conversions from other IRA types can also be used to create additional Roth IRAs. Funds from the rollover or conversion are used to create a new Roth account with the custodian of your choice, just as they would be if you did not already have a Roth IRA. If you have already established multiple Roth IRA accounts, you can apply the funds to an existing account instead of creating a new account with each rollover or conversion.

Distributions and Withdrawals

Distributions and other withdrawals or conversions can be made from any of your Roth IRA accounts. Though the IRS views your separate Roth accounts as a single account spread among multiple custodians, you can initiate changes or withdrawals from individual accounts without affecting the others. Any distributions or other changes are subject to IRS rules; early withdrawals from any account or attempts to modify an account when it is not allowed can result in taxes and a 10-percent penalty being applied to the withdrawal.

About the Author

Born in West Virginia, Jack Gerard now lives in Kentucky. A writer and editor with more than 10 years of experience, he has written both articles and poetry for publication in magazines and online. A former nationally ranked sport fencer, Gerard also spent several years as a fencing coach and trainer.

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