Is There a Limit on the Number of IRAs I Can Have?

by Kevin on July 21, 2008

Last week I told you how to make sure your money was safe from a bank failure. As I did my research on the topic, I discovered that IRA accounts are also covered at those banks. The FDIC insures your individual retirement accounts up to $250,000.

One of the questions I have received via e-mail in the past revolves around IRA accounts. Namely, if I have a Roth IRA with Bank A, can I open a new one with Bank B? Or are my options unlimited in regards to the number of different individual retirement accounts I can have?

The short answer is yes, you can have as many IRA accounts as you wish. You could open an IRA account up with 100 different banks if you felt the need. Of course you don’t really want to do that. Consolidating into one IRA account with the highest number of quality, low cost investment options would make your life a lot more simple. (Unless the institution it is held at fails.)

You can also have both a Roth IRA and a Traditional IRA. No matter how many IRAs you have you must remember you can only invest the maximum amount across all accounts. Currently that maximum is $5,000 for most people. If you have a Roth IRA and a Traditional IRA you could put $2,500 into each account for a total of $5,000 (rather than $5,000 into each and a $10,000 total).

As I was planning to write this article, Patrick at Cash Money Life put up a great article about the number of different retirement accounts you can have (401k, IRAs, all of them).

What if I have more than $250,000 in my IRA?

As I mentioned at the beginning if you have a Roth IRA with IndyMac Bank and it has $600,000 in it… the FDIC will guarantee the first $250,000. You may be able to get the remaining $350,000 from the bank eventually, but it would be quite disheartening to see more than half of your investment move out of your hands for a while. Disheartening is an understatement. If $350,000 of my money suddenly was inaccessible I would be freaking out.

I can understand in this situation some might consider opening up a second IRA with another institution to hedge your bets against failure.

But remember, bank failures don’t happen every day. And opening up a second IRA with a different institution does not ensure you will enjoy the same low cost investments as with your first IRA. I would recommend finding a quality institution (we use Vanguard) to keep your IRA safe. Plus, I wouldn’t recommend using a bank in the first place as they usually don’t offer the cheapest investments.

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July 25, 2008 at 4:02 am

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Joe - Va Beach July 21, 2008 at 3:29 pm

Does the FDIC insure EACH account up to $250,000 at the institution? Or ALL of my accounts? So, if the $600,000 at IndyMac was split out to 3 around $200k each, would they have all been insured?

Someday I’ll have enough in IRAs to worry about this.

Kym July 21, 2008 at 7:41 pm

Joe – you would receive the $250k insurance at each institution. So, if you had 3 accounts at 3 completely different banks with $200k each, you’re fine. If you simply have 3 accounts at the same bank and that bank fails, you’re only insured on the first $250k.

Curiously, how is it that IRAs are insured, if they’re investments and investments are not insured? I mean unless you’re investing in the bank that failed, your investments should be fine, no? And if you did invest in the bank that failed…well your investment failed and that wouldn’t be covered. Not really clear on this one.

Kevin July 21, 2008 at 10:29 pm

Thanks Kym! She is right, you get $250,000 per institution rather than per account.

Doris October 1, 2008 at 11:55 am

MY IRA IS AT FIDELITY – IS BROKERAGE INSURANCE SECURE NOW?

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