Roth IRAs offer unique features that make them particularly attractive to some investors. Unlike other investment accounts, you do not have to take age-required distributions. That leads some people to wonder how many of these accounts you can have.
So, we created a guide that covers everything you need to know about Roth IRAs. Keep reading to find out how many you can have, how much you can contribute, who can contribute to a Roth IRA, and much more!
How Many Retirement Accounts Can You Have?
It might be a surprise, but you can have as many retirement accounts as you want. However, there are contribution restrictions.
You can’t contribute more than the maximum allowed by law for each account type. The IRS categorizes these accounts as Roth IRAs and traditional IRAs, which include 401ks.
The IRS sets forth limits for each account type yearly, and you can contribute the maximum amount allowed by the tax laws to both accounts, as long as your income and other
What is a Roth IRA?
A Roth individual retirement account (IRA) is an investment account that you can use to save for retirement. Your contributions are post-tax, so you do not have to pay income tax when you withdraw the funds, as long as you have reached the minimum withdrawal age.
Roth IRA Eligibility
One of the unique features of the Roth IRA is that you can contribute to it even if you are self-employed. Anyone who has taxable income can be a Roth IRA contributor. You do not need a sponsor or employer contribution.
Roth IRA Income Limits
One of the major restrictions for Roth IRAs is that they have income limits. Your IRS filing status dictates your contribution amount based on your income. Below are the limits for each type of IRS filer.
- Married Filing Jointly (up to $204,000) = Maximum contribution $6,000 (under 50) or $7,000 (over 50)
- Married Filing Jointly ($204,000 – $214,000) = A reduced contribution amount
- Married Filing Jointly (over $214,000) = No contribution
- Married Filing Separately (under $10,000) = A reduced amount
- Married Filing Separately (over $10,000) = No contribution
- Head of Household, Single, Married Filing Separately (up to $129,000) = Max contribution
- Head of Household, Single, Married Filing Separately ($129,000 to $144,000) = A reduced contribution
- Head of Household, Single, Married Filing Separately (over $144,000) = No contribution
It is also important to note that if you are married and filing separately, you may not be living in the same home as your spouse.
Roth IRA Contribution Limits
Each year, the IRS sets limits for the amount of money you can contribute to your Roth IRA and other investment accounts. For 2022, the maximum amount an individual can contribute to their IRA if they are less than 50 years old is $6,000.
Once a taxpayer is over 50, they can contribute an additional $1,000 for a total contribution this year of $7,000. However, you can only contribute up to the amount of taxable income you earned or $7,000, whichever is lower.
Timing Roth IRA Contributions
You can make contributions up until the day that your taxes are due for the year. So, in 2022, the last day for Roth IRA contributions is April 15th, 2023. If you plan on filing an extension, filing the extension will not extend the time you have to contribute to your Roth IRA. So, all contributions need to be before April 15th.
Roth IRA Withdrawal Rules
Unlike other retirement accounts, you are not required to take mandatory distributions at 70. However, distributions taken before age 59 1/2 are subject to a ten percent payment. If you are older than 59 1/2, your withdrawals are penalty and tax-free because you paid income tax on the money you contributed.
The only two withdrawal restrictions are that you are 59 1/2 or older, and the money you contributed has to have been in the account for more than five years. Otherwise, you are subject to a ten percent penalty on the money you withdraw.
Changes in Roth IRA Rules
Each year at the beginning of the year, the IRS issues the limits for retirement accounts. You have to look out for the income and contribution limits to ensure you do not incur a penalty for contributing too much or making contributions if you are over the income limit threshold.
Roth IRAs FAQs
Take a look at the answers to these frequently asked questions about Roth IRAs to ensure you understand the benefits and limitations.
What is the Five-Year Rule for Roth IRAs?
Roth IRAs have a five-year rule that prevents you from withdrawing money for the first five years, regardless of your age. So, if you do not start contributing until you are 62, you will not be able to remove the money without a penalty until you are at least 67.
Can You Contribute to a Roth IRA at Any Time?
You can contribute to a Roth IRA for as long as you earn income. There are no age restrictions on funds you remove from a Roth IRA, meaning you do not have to take a minimum required distribution.
What are the Rules for Putting Money in a Roth IRA?
Anyone who earns income can contribute to a Roth IRA up to the maximum amount they earned, or $6,000 for an individual under 50 and $7,000 for anyone over 50.
What is the Maximum Contribution You Can Make to a Traditional IRA and Roth IRA?
The maximum amount someone under 50 can contribute to their traditional IRA or 401k is $20,500, and the maximum contribution to a Roth IRA is $6,000. So, the maximum contribution you can make to both accounts as a single taxpayer is $26,500. If you are nearing retirement age, some people suggest that contributing to both accounts may help you ensure that you have a secure retirement. However, there are other things you need to consider, like how much debt you have.
If you are paying high-interest rates, it would be better to pay down those debts before contributing money to your traditional or Roth IRA.
Do You Understand the Limits of Roth IRAs?
Roth IRAs are unique because you pay taxes on the money when you put it in your Roth IRA. You do not have to pay taxes when you withdraw the money. You can also leave the money in your Roth IRA and give it to an heir after you die. So, it makes sense to wonder how many of these accounts you can have, especially if you are curious about leaving money to your family members.
While Roth IRAs are excellent investment accounts, there are limits. You can’t contribute more than your taxable income for a given year. There is a yearly cap typically around $6,000 to $7,000, and while you can have many accounts as you want, you can’t contribute more than the maximum contribution for the year as set forth by the IRS.