How Many Roth IRAs Can I Have? Contribution Rules
Understand Roth IRA rules: how multiple accounts work, the single contribution limit applied, and how to correct any overcontributions.
Roth IRAs offer tax-free growth and withdrawals in retirement. Many individuals wonder how many accounts they can hold and the rules for contributions. This article clarifies the guidelines for multiple Roth IRA accounts and detailed contribution regulations.
Opening Multiple Roth IRA Accounts
An individual can establish multiple Roth IRA accounts, and these accounts can be held at different financial institutions. The annual contribution limit applies to the individual across all their Roth IRAs, not to each separate account. For instance, if the annual limit is $7,000, an individual contributing to two different Roth IRAs must ensure their combined contributions do not surpass this $7,000 threshold.
Individuals may choose to open multiple Roth IRAs for various reasons. One common reason is to diversify investment strategies by utilizing different investment options or managers available at various institutions. Another factor could be convenience, such as keeping funds from different sources separate or managing accounts with different beneficiaries.
Roth IRA Contribution Rules
The IRS establishes specific annual contribution limits for Roth IRAs, which can vary by tax year. For the 2025 tax year, individuals under age 50 can contribute up to $7,000. Those aged 50 and older are permitted an additional “catch-up” contribution of $1,000, bringing their total maximum contribution to $8,000 for 2025.
Eligibility to contribute to a Roth IRA is also determined by one’s Modified Adjusted Gross Income (MAGI), which can phase out or eliminate the ability to contribute directly. For single filers in 2025, the ability to make a full Roth IRA contribution begins to phase out if their MAGI is $150,000 or more, becoming fully phased out at $165,000. For those married filing jointly in 2025, the phase-out range starts at a MAGI of $236,000, with contributions entirely eliminated at $246,000. If an individual’s MAGI falls within these ranges, they can make a partial contribution, but if it exceeds the upper threshold, direct contributions are not allowed.
Handling Overcontributions
Contributing more than the allowable limit to a Roth IRA, whether due to exceeding the dollar limit or the income-based MAGI limits, results in an excess contribution. An excise tax of 6% is applied to the excess amount for each year it remains in the account. This penalty continues annually until the excess is removed from the Roth IRA.
To correct an excess contribution and avoid continuous penalties, individuals generally have until their tax filing deadline, including extensions, to remove the excess amount. This removal must include any earnings attributable to the excess contribution. The earnings portion of the withdrawal is considered taxable income for the year the original excess contribution was made and may be subject to an additional 10% early withdrawal penalty if the account holder is under age 59½.
If the excess contribution is not removed by the tax filing deadline, individuals can still correct the mistake. Options include withdrawing the excess amount (though the 6% penalty will still apply for the year(s) the excess remained) or applying the excess contribution to a future year’s contribution limit. For those choosing to apply it to a future year, the 6% penalty is still incurred for the year the excess occurred, but the error is corrected for subsequent years.