How Many Traditional IRAs Can I Have?

Traditional Individual Retirement Arrangements (IRAs) help individuals save for retirement with tax advantages. These accounts allow investments to grow on a tax-deferred basis, with taxes typically paid only upon withdrawal in retirement. Understanding the flexibility and limitations of Traditional IRAs is important for effective retirement planning.

Understanding the Number of Traditional IRA Accounts

There is no federal limit on the number of Traditional IRA accounts an individual can hold. An individual may choose to open multiple Traditional IRA accounts at different financial institutions for various reasons. This approach can allow for diversification of investment choices or the ability to work with different investment advisors. Some individuals also find it useful to separate personal IRA funds from inherited IRA funds to simplify record-keeping. While the number of accounts is unlimited, certain rules and limits apply across all of an individual’s Traditional IRA accounts combined.

Contribution Rules for Multiple Traditional IRAs

While an individual can have several Traditional IRA accounts, the annual contribution limit applies to the total amount contributed across all of them. For 2025, the maximum an individual can contribute is $7,000. Those aged 50 and older can make an additional catch-up contribution of $1,000, increasing their total annual limit to $8,000. These limits are set by the IRS and are not applied per account.

Contributions to a Traditional IRA must come from earned income, and the total contributions cannot exceed an individual’s taxable compensation for the year. If contributions exceed the aggregate annual limit, the excess amount is subject to a 6% excise tax for each year it remains in the account. This tax is assessed annually until the excess contribution is withdrawn or otherwise corrected. Correcting an excess contribution often involves removing the over-contributed amount and any associated earnings by the tax filing deadline, including extensions, to avoid penalties.

The deductibility of Traditional IRA contributions can also be affected by income levels and participation in an employer-sponsored retirement plan. While there are no income limits to contribute to a Traditional IRA, the ability to deduct those contributions on your tax return may be phased out or eliminated based on your modified adjusted gross income (MAGI) and whether you or your spouse are covered by a retirement plan at work. Even if contributions are not tax-deductible, the earnings within the Traditional IRA still grow on a tax-deferred basis.

Managing Multiple Traditional IRA Accounts

Holding multiple Traditional IRA accounts requires diligent management to ensure compliance with IRS regulations and to maintain a clear financial picture. It is important to keep accurate records of all accounts, including account balances, investment holdings, and beneficiary designations. Tracking contributions and distributions across all accounts is necessary to avoid errors and potential penalties.

Required Minimum Distributions (RMDs) are a significant consideration for individuals with multiple Traditional IRAs once they reach age 73. The RMD calculation is based on the aggregate balance of all Traditional IRA accounts as of December 31 of the previous year. While the total RMD amount is calculated using the combined balance, it can be satisfied by withdrawing the entire amount from one Traditional IRA, or by taking partial distributions from multiple accounts. This aggregation rule applies only to Traditional IRAs, SEP IRAs, and SIMPLE IRAs, not to employer-sponsored plans such as 401(k)s.

Managing multiple accounts can also introduce additional administrative complexity and potentially higher fees. Each financial institution may charge its own account maintenance fees, trading fees, or other service charges. Ensuring beneficiary designations are consistent and up-to-date across all accounts is also important for estate planning purposes. Reviewing these details periodically helps to streamline financial management and align with long-term goals.

Consolidating Traditional IRA Funds

Many individuals with multiple Traditional IRA accounts consolidate their funds into a single account for practical reasons. Consolidating can simplify overall financial management, reduce administrative complexity, and potentially lower total account fees by eliminating redundant charges. It can also make calculating and taking Required Minimum Distributions (RMDs) more straightforward.

There are two primary methods for consolidating Traditional IRA funds: direct rollovers and indirect rollovers. A direct rollover, also known as a trustee-to-trustee transfer, involves the funds being moved directly from one financial institution to another without the account holder taking possession of the money. This method is generally preferred because it avoids potential tax withholding and the risk of missing the rollover deadline. There is no limit to the number of direct rollovers an individual can perform.

An indirect rollover occurs when the funds are distributed directly to the account holder, who then has 60 days to deposit the money into another IRA. If the funds are not redeposited within this 60-day window, the distribution may be considered taxable income and potentially subject to early withdrawal penalties if the individual is under age 59½. The IRS generally limits indirect rollovers to one per 12-month period across all of an individual’s IRAs. Before consolidating, it is advisable to check for any potential surrender charges or transfer fees from the originating institution, and to consider whether the new account offers the desired investment options.