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Writer's pictureMegan Waters, CFP®

How Many Retirement Accounts Can I Have?


How many retirement accounts can I have?

Retirement planning is a crucial aspect of financial planning, and one of the most effective ways to save for retirement is through retirement accounts.


There are several types of retirement accounts available, each with its own set of rules and benefits.


However, you may be wondering, how many retirement accounts can I have?


But first, be sure to download our free checklist: What accounts should I consider if I want to save more?


In this article, we will explore the answer to that question and provide tips for managing multiple retirement accounts.


The Basics of Retirement Accounts


Before we dive into the specifics of how many retirement accounts you can have, let's first review the different types of retirement accounts available:

  1. 401(k): A retirement account offered by an employer, typically with contributions made through payroll deductions. Earnings grow tax-deferred until withdrawn in retirement.

  2. Traditional IRA: An individual retirement account that allows you to contribute pre-tax dollars, reducing your taxable income.

  3. Roth IRA: An individual retirement account that allows you to contribute after-tax dollars, but provides tax-free growth and withdrawals in retirement.

  4. SEP IRA: A retirement account for self-employed individuals or small business owners.

  5. Simple IRA: A retirement account for small businesses that allows both the employer and employee to make contributions.

Comparison of Retirement Account Types


Each type of retirement account has its own set of rules and benefits. Here is a comparison of some key features:

Retirement Account Type

Contribution Limit (2023)

Employer Contributions

Tax Benefits

401(k)

$22,500 + $7,500 Catchup age 50+

Yes

Pre-tax and tax-deferred growth

Traditional IRA

$6,500

No

Pre-tax and tax-deferred growth

Roth IRA

$6,500

No

After-tax and tax-free growth

SEP IRA

$66,000 or 25% of income

Yes

Pre-tax and tax-deferred growth

Simple IRA

$15,500

Yes

Pre-tax and tax-deferred growth

As you can see, the contribution limits and tax benefits of each retirement account type vary.


Additionally, some accounts, like the 401(k), require employer contributions, while others, like the traditional IRA, do not.


How Many Retirement Accounts Can You Have?


Now, let's get to the question at hand - how many retirement accounts can you have?


The short answer is that there is no limit to the number of retirement accounts you can have. However, the IRS does have rules that govern how much you can contribute to these accounts each year.



For example, in 2023, the contribution limit for a 401(k) is $22,500 while the contribution limit for a traditional IRA is $6,500. If you have multiple retirement accounts, you cannot exceed these contribution limits in total. However, you can spread your contributions across multiple accounts.


It's important to note that contribution limits apply to each type of retirement account individually. For example, if you have two 401(k) accounts, you cannot contribute $22,500 to each account. Instead, you must stay within the $22,500 limit for all of your 401(k) contributions combined.


Pros and Cons of Multiple Retirement Accounts


Now that we've established that there is no limit to the number of retirement accounts you can have, let's discuss the pros and cons of managing multiple retirement accounts.


Pros:

  1. Flexibility: Different retirement accounts have different rules and benefits, allowing you to tailor your retirement savings to your specific needs.

  2. Tax benefits: Depending on your income and tax situation, having multiple retirement accounts can provide additional tax benefits.

Cons:

  1. Complexity: Managing multiple retirement accounts can be complex and time-consuming, especially if you have several different types of accounts.

  2. Overlapping investments: If you have multiple retirement accounts, it's possible that you may end up with overlapping investments, which can reduce the diversification benefits.

  3. Fees: Each retirement account may come with its own set of fees, which can add up over time.

Tips for Managing Multiple Retirement Accounts


If you do decide to have multiple retirement accounts, it's important to have a plan for managing them effectively.


Here are some tips:

  1. Consolidate where possible: Consider consolidating similar retirement accounts to simplify your portfolio and reduce fees.

  2. Use a financial advisor: A financial advisor can help you develop a retirement savings plan that incorporates multiple accounts and meets your specific needs.

  3. Keep track of contribution and income limits: Be aware of the contribution and income limits for each type of retirement account and make sure you don't exceed them.

  4. Rebalance your portfolio: Regularly review and rebalance your retirement accounts to ensure you maintain an appropriate asset allocation.

Conclusion


In conclusion, there is no limit to the number of retirement accounts you can have, but there are contribution limits that apply to each type of account individually. While having multiple retirement accounts can provide diversification and flexibility, it can also be complex and potentially costly.


If you do decide to have multiple retirement accounts, consider consolidating where possible and working with a financial advisor to develop a retirement savings plan that meets your needs. By managing your retirement accounts effectively, you can set yourself up for a comfortable and secure retirement.



 

Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view.

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