Having multiple IRAs can help you fine-tune your tax minimization strategy and give you access to more investment options and greater account insurance. One of the main reasons to consider opening several IRAs is to increase the diversification of your portfolio. Diversification manages the risk of your investments and avoids overweighting your portfolio in a certain direction. Another advantage of managing multiple IRAs is the freedom it gives people.
You should also keep in mind that the percentage of each investment that goes to each IRA account is different, making it difficult to develop a stable and simplified portfolio until you gain enough experience. As long as you know the pros and cons of having multiple IRAs, you can make an informed decision about whether this is really the right option for you. For example, an employee has the freedom to simultaneously open a traditional IRA and a Roth IRA, or they can also choose to have several IRAs of either type. The flexibility of managing multiple IRAs also applies when rebalancing your portfolio or changing your investment allocations.
If you have money in your old workers' retirement plan, or if tax incentives are enough to motivate you to save and invest later, then a traditional IRA could be the right choice. Having a Roth IRA from which you can make tax-free withdrawals could help offset the taxable withdrawals associated with a traditional IRA. Having several IRAs also makes sense if you want to employ different investment strategies, says Michael W. You can divide the allowable contribution between your IRAs or contribute the full amount to an IRA.
The SECURE Act eliminated the maximum age for making contributions to the traditional IRA, which was previously limited to 70 and a half years. Having multiple IRAs can be useful for some people, while for others it's still an unnecessary headache. For example, the annual IRA contribution limit is the same whether you have 15 IRA accounts or if you only have one. For example, you may have some IRAs in discount brokers and others in mutual fund families or robotic advisors.
Having more than one IRA can also mean that you'll have to spend more time tracking your different investments.