Can You Open Multiple IRAs?

Individual Retirement Accounts (IRAs) are a fundamental tool for building financial security in retirement. It is possible to establish multiple IRAs, allowing for diverse investment approaches and distinct tax benefits tailored to evolving financial objectives. Having several IRAs can support different savings goals, provide flexibility in managing assets, and help optimize tax strategies over time.

Understanding Multiple IRAs

Individuals can establish and hold multiple IRA accounts simultaneously. This flexibility allows for various configurations, such as maintaining different types of IRAs or holding several accounts of the same type with various financial institutions. Common reasons for this include diversifying investment custodians to spread risk and access a broader range of investment products, or separating different investment strategies for simpler portfolio management.

Regardless of the number of IRA accounts held, the Internal Revenue Service (IRS) aggregates them for regulatory purposes. The primary collective treatment applies to annual contribution limits, meaning the total amount contributed across all combined accounts cannot exceed the set maximum for a given tax year. This ensures individuals do not circumvent contribution limits by opening additional accounts.

Different Types of IRAs and Their Interaction

Different IRA types have unique tax characteristics. A Traditional IRA allows for pre-tax, potentially tax-deductible contributions, with tax-deferred growth and taxes paid upon withdrawal in retirement. A Roth IRA is funded with after-tax contributions, which are not tax-deductible, but qualified withdrawals in retirement are tax-free. Traditional and Roth IRAs are subject to a combined annual contribution limit.

Other types include Simplified Employee Pension (SEP) IRAs and Savings Incentive Match Plan for Employees (SIMPLE) IRAs, primarily for self-employed individuals and small businesses. A SEP IRA is employer-funded; contributions are tax-deductible for the employer and grow tax-deferred for the employee. SEP IRA contributions do not count against an individual’s personal Traditional or Roth IRA limits.

A SIMPLE IRA allows for both employee salary deferrals and employer contributions. Employee contributions reduce taxable income, and all growth is tax-deferred. Like SEP IRAs, SIMPLE IRA contributions do not affect an individual’s ability to contribute to a Traditional or Roth IRA.

Managing Contributions Across Multiple IRAs

When contributing to multiple IRAs, it is essential to understand how annual limits apply. For Traditional and Roth IRAs, the annual contribution limit applies to the total amount contributed across all such accounts. For 2025, this combined limit is $7,000, with an additional catch-up contribution of $1,000 for individuals aged 50 or older, totaling $8,000. An individual could contribute $3,500 to a Traditional IRA and $3,500 to a Roth IRA, or any other combination, as long as the sum does not exceed the annual maximum. Exceeding these combined contribution limits can result in penalties from the IRS, typically an excise tax on the excess amount for each year it remains in the account.

Contributions to SEP IRAs and SIMPLE IRAs operate under separate rules. For a SEP IRA, the employer can contribute up to 25% of an employee’s compensation, or a maximum of $70,000 for 2025, whichever is less. Self-employed individuals generally base this on 20% of their net self-employment income.

For a SIMPLE IRA, employees can defer up to $16,500 of their salary in 2025, with catch-up contributions of $3,500 for those aged 50 and older, and $5,250 for those aged 60 to 63. Employers also make contributions, either matching employee deferrals up to 3% of compensation or making a non-elective contribution of 2% of compensation. These employer-funded plans provide additional retirement savings avenues distinct from personal IRA limits, allowing for higher overall contributions.

Reporting Multiple IRAs on Your Taxes

Accurate tax reporting is important when managing multiple IRA accounts. Financial institutions that hold your IRA accounts are required to report contributions and other account information to both you and the IRS. For contributions, you will receive IRS Form 5498, “IRA Contribution Information,” from each custodian by May 31 following the tax year. This form details contributions to Traditional, Roth, SEP, and SIMPLE IRAs, as well as rollovers and the fair market value of the account at year-end. You do not file Form 5498 with your tax return; it is provided for your records and used by the IRS to verify reported contributions.

If you take distributions from any of your IRAs, you will receive IRS Form 1099-R, “Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.” This form reports the gross distribution amount and the taxable portion. You typically receive a separate Form 1099-R for each distribution of $10 or more from each account. When preparing your tax return, use the information from all your Form 1099-R and Form 5498 documents to accurately report your IRA activity. Maintaining thorough records of all contributions, distributions, and rollovers across all your IRA accounts is advisable to ensure compliance with IRS regulations.