Why this matters
Holding more than one Individual Retirement Account (IRA) is common: job changes, side businesses, rollovers, and purposeful tax diversification all create multiple accounts. While multiple IRAs are legal and sometimes useful, unmanaged duplication can increase fees, create confusing paperwork, and lead to costly mistakes (excess contributions, missed required minimum distributions, or improper rollovers). This guide gives practical, professional steps you can use to organize multiple IRAs, reduce costs, and align accounts with your retirement plan.
Key rules you must know (short list)
- Annual IRA contribution limits apply per individual across Traditional and Roth IRAs combined—contributions to multiple IRAs count toward that single annual cap (see IRS Publication 590‑A) (https://www.irs.gov/retirement-plans/ira-types).
- You can perform unlimited direct trustee‑to‑trustee transfers between IRAs without tax consequences; a 60‑day rollover (indirect rollover) has stricter rules and timing (and the one‑rollover‑per‑12‑month rule applies to IRA rollovers) (https://www.irs.gov/retirement-plans/ira-rollovers-and-conversions).
- Required minimum distributions (RMDs) from Traditional, SEP, and SIMPLE IRAs are calculated separately for each account type but generally can be aggregated and withdrawn from any one or more Traditional/SEP/SIMPLE IRAs (see IRS RMD guidance) (https://www.irs.gov/retirement-plans/required-minimum-distributions-rmds).
- Converting Traditional IRA money to a Roth IRA is taxable in the year of conversion; there is no longer an income limit preventing conversions (https://www.irs.gov/retirement-plans/roth-iras).
Step‑by‑step strategy for managing multiple IRAs
- Inventory every account
- List custodian, account type (Traditional, Roth, SEP, SIMPLE, self‑directed), current balance, average annual fees/expense ratios, and asset allocation. Keep login credentials secure in a password manager.
- Why this matters: you can’t optimize what you don’t measure. I always begin client engagements with a single inventory spreadsheet.
- Decide whether to consolidate or keep separate
- Consolidate when there are duplicated account types with high fees or limited investment options. Trustee‑to‑trustee transfers make this easy and tax‑free.
- Keep accounts separate when: different tax treatments are needed (e.g., a Roth you want to preserve for tax‑free growth), when employer plans require leaving funds, or when specialized custodians provide unique investments (like a self‑directed IRA for real estate).
- Example: I consolidated three legacy Traditional IRAs into one low‑cost IRA at a discount broker, saving a client ~0.6% in aggregate fees and simplifying tax reporting.
- Compare fees and investment menus
- Look at custodian fees, mutual fund expense ratios, account maintenance fees, and trading commissions. Over decades, a 0.5% fee differential can meaningfully affect retirement outcomes.
- Favor low‑cost index funds or ETFs for core holdings; use specialized managers only when active management adds clear value.
- Coordinate asset allocation across accounts
- Use tax location optimization: place tax‑inefficient investments (taxable interest, taxable bond funds) inside tax‑deferred accounts, and tax‑efficient holdings (individual stocks, broad index funds) in Roth or taxable accounts depending on your situation.
- Rebalance at a household level, not by account. Treat all IRAs as part of a single portfolio when rebalancing to avoid unnecessary trades or drifting risk exposure.
- Use rollovers and conversions intentionally
- Direct rollovers: move retirement plan money (401(k), 403(b)) directly into an IRA with a trustee‑to‑trustee transfer to avoid withholding and taxes.
- Roth conversions: consider partial conversions in lower income years to spread tax liability and build tax‑diversified retirement buckets. Use tax projections and be mindful of income phaseouts and Medicare IRMAA thresholds.
- Important: indirect 60‑day rollovers are risky due to the strict timeline and the once‑per‑12‑month rollover rule for IRAs. Prefer direct trustee‑to‑trustee transfers (https://www.irs.gov/retirement-plans/ira-rollovers-and-conversions).
- Mind contribution strategy
- Because contribution limits are aggregated across IRAs, open multiple accounts only when you need different investment types or custodial features—not to increase contribution room. For guidance on choosing between Roth and Traditional accounts, see our deeper guide on choosing contributions (How to Choose Between Roth and Traditional IRA Contributions: https://finhelp.io/glossary/how-to-choose-between-roth-and-traditional-ira-contributions/).
- Keep beneficiary designations up to date
- IRA beneficiary forms override wills for those assets. Review designations after major life events (marriage, divorce, birth, death). Use contingent beneficiaries where appropriate and understand inherited IRA rules.
- Plan for RMDs and aggregation rules
- Traditional, SEP, and SIMPLE IRAs share aggregation rules for RMDs—you can take the total required amount from any one or more of those IRAs (https://www.irs.gov/retirement-plans/required-minimum-distributions-rmds). However, RMDs from employer plans (like 401(k) accounts) are separate.
- Establish an annual review cadence
- Each year review fees, performance, asset allocation, required distributions (as you approach RMD age), and whether any conversions or rollovers are advantageous.
Common mistakes and how to avoid them
- Attempting frequent indirect rollovers: use direct trustee‑to‑trustee transfers instead.
- Overcontributing: remember the annual limit is combined across IRAs; correct excess contributions promptly to avoid the 6% penalty (see IRS Pub 590‑A).
- Leaving money at an old custodian with limited choices or higher fees: check for low‑cost consolidation opportunities.
- Ignoring beneficiary forms or failing to coordinate beneficiary strategy across accounts.
Tax and timing considerations (practical tips)
- Look for low‑income years to do Roth conversions—this creates tax‑free future withdrawals but triggers income tax now.
- Beware of conversions pushing you into a higher tax bracket or raising your Modified Adjusted Gross Income (MAGI) for tax credits, premium subsidies, or Medicare Part B/IRMAA surcharges.
- If you have a self‑directed IRA or alternative investments, consolidation might be more complex—evaluate custody transfer rules and potential short‑term liquidity needs.
When to work with a professional
You should consult a tax advisor or CFP when: you’re planning large Roth conversions, you approach RMD age, you hold illiquid or alternative investments in an IRA, or when rollovers involve plan loans or after‑tax contributions. In my practice I find a short planning session (60–90 minutes) often prevents costly mistakes and clarifies whether consolidation or separation is optimal.
Quick action checklist (what to do this month)
- Create an inventory spreadsheet for all IRAs and retirement plans.
- Identify any custodial fees or funds with expense ratios above comparable index funds.
- Schedule one trustee‑to‑trustee transfer for consolidation if you have multiple legacy Traditional IRAs with high fees.
- Review beneficiary forms and update as needed.
- If considering Roth conversions, run a tax projection with your CPA or tax preparer.
Additional reading and internal resources
- How to Choose Between Roth and Traditional IRA Contributions (https://finhelp.io/glossary/how-to-choose-between-roth-and-traditional-ira-contributions/)
- Converting a Traditional IRA to Roth: Timing and Tax Strategies (https://finhelp.io/glossary/converting-a-traditional-ira-to-roth-timing-and-tax-strategies/)
- Retirement Plan Portability: Moving Pensions, 401(k)s, and IRAs (https://finhelp.io/glossary/retirement-plan-portability-moving-pensions-401ks-and-iras/)
Professional disclaimer
This article is educational and does not constitute individualized financial, tax, or legal advice. Rules for IRAs and retirement plans are subject to change. Consult the IRS (https://www.irs.gov/retirement-plans) and a qualified financial or tax professional before making rollovers, conversions, or consolidation decisions.
Authoritative sources
- IRS — IRA resource pages and rollover rules: https://www.irs.gov/retirement-plans
- IRS — Required Minimum Distributions (RMD) guidance: https://www.irs.gov/retirement-plans/required-minimum-distributions-rmds
- IRS — Roth IRAs and conversions: https://www.irs.gov/retirement-plans/roth-iras
