Multiple Roth IRAs? Options

[NASCAR20FAN]

Ok, I have a Roth IRA now that I fund fully $416.66 a month. My question is... Is it possible to open another Roth? I'm sking because I'd like to have a 2nd for the $ that i'm not putting into my savings account. Plus, it would be nice to have some extra savings that will grow tax free.

Thanks

[ERISAnut]

You can have as many Roth IRAs as you wish, but the combined limit when funding them will remain at $5,000 per year.

This post has been edited by ERISAnut: Sep 15 2008, 02:47 PM

[david rigby]

Got an employer that sponsors a 401(k) plan? If so, use it.

[seanof30306]

Got an employer that sponsors a 401(k) plan? If so, use it.

Am I correct in saying you'd prioritize your contributions as:

1. 401K to employer's match (no more)

2. Full Roth contribution

3. 401K to max?

[ERISAnut]

Got an employer that sponsors a 401(k) plan? If so, use it.

Am I correct in saying you'd prioritize your contributions as:

1. 401K to employer's match (no more)

2. Full Roth contribution

3. 401K to max?

Typically, yes. But each case is different. 401(k) to the match limit would, depend on vesting schedule and how long you expect to remain with the employer. But, that is a safe number 1 99% of the time. Everything else would largely depend on your current tax bracket, and what you expect tax rates to do in the future. A zero tax rate (Roth) is certainly a compelling case for prioritizing before an immediate tax deduction. Again, each case is different. Many variables to consider.

[John G]

Generally, taking a match is a great idea, you get a 100% or 50% immediate return. But....you need to understand any constraints on how those funds are invested. As long as you have a range of investment options - well diversified stock and bond funds then you get the green light. If your company plan has odd limitations on investing, then perhaps this is not the best route, but you could post those concerns here and I will try to reply.

[Lori Friedman]

You can have as many Roth IRAs as you wish

Multiple IRA's will usually cost you multiple annual fees. If you spread small balances among several accounts, and if your investment returns are modest, the fees could negate or exceed your earnings.

[GMK]

Lori is correct. Those $10 (or whatever amount) annual fees on each IRA can add up.

Some fund companies, however, set conditions where they waive the annual fee, for example, if you sign up for monthly contributions by electronic fund transfers from your bank to the fund, etc.

Generally, if your account balance is more than some amount, the annual fee goes away. Good fund companies (good for the investor) will add up the balances of all your IRA's at that company to see if you are above this level, rather than requiring each individual fund to exceed the level.

Ask for and read the prospectus to find out about the annual fee, if any, on your IRA's.

[masteff]

Some fund companies, however, set conditions where they waive the annual fee, for example, if you sign up for monthly contributions by electronic fund transfers from your bank to the fund, etc.

Generally, if your account balance is more than some amount, the annual fee goes away. Good fund companies (good for the investor) will add up the balances of all your IRA's at that company to see if you are above this level, rather than requiring each individual fund to exceed the level.

On that same vein, the investment company where a person's 401(k) is located may also offer reduced fees on IRAs to participants in the 401(k).