How Many Retirement Accounts Should You Have? Why More Isn’t Necessarily Better

If you’re already saving for retirement, you’re ahead of most Americans. Over half of millennials and Gen Xers don’t participate in employer-sponsored retirement plans, according to data from Pew Research. But don’t get too cocky. While you’re doing the right thing by diligently saving a portion of each paycheck, you could be making a big mistake if you’re not paying attention to where that money is going and how many retirement accounts you have.

The problem with having too many retirement accounts

Retirement accounts
Retirement accounts | iStock

Job-hopping is on the rise, and while switching employers can be a good way to boost your salary, it can create chaos in your retirement plan. With every new job comes a new retirement account. If you don’t consolidate them as you go, you could easily end up with half-a-dozen different accounts or more.

Unfortunately, when it comes to retirement accounts more isn’t necessarily merrier. For one, it’s simply confusing. The more accounts you have, the easier it is to lose track of one – and lose track of your money. Plus, it’s difficult to develop a coherent retirement investing plan when your assets are scattered across different accounts.

“Holding a variety of accounts often makes it harder to maintain a consistent asset allocation strategy that is aligned with your goals,” notes Merrill Edge. “It can also mean that these critical retirement assets may not reflect, as a whole, your preferred risk tolerance, targeted asset mix and investment horizon.”

Consider a 401(k) rollover

To keep things simple, many experts recommend rolling over your 401(k) savings to an IRA when you leave an employer. An IRA usually has lower fees and more investment options than a 401(k). You may also be able to move the funds to a 401(k) at your new job. If you don’t have very much money saved, you may have no choice but to either roll over the funds or take a distribution from the account.

In some cases, you may be able to leave your money in your old 401(k). But you won’t be able to make any more contributions to that account. The money may also move around if your old company gets bought out or changes 401(k) providers. The savings will still be yours, but there’s a chance you could lose track of them.

Can I have more than one IRA?

Having a grab bag of 401(k)s isn’t necessarily desirable, but there’s no rule saying you can’t do it. The same goes for IRAs. You can open multiple IRA accounts. But as with 401(k)s, fewer may be better

Whether you have one IRA or six, you still can’t contribute more than the annual limit ($5,500 for 2018) to all your accounts combined. If you have both a traditional IRA and a Roth IRA, you can’t contribute more than the annual maximum either. So, you could save $3,000 in your Roth and $2,500 in your traditional IRA. But you couldn’t contribute more than $5,500 to your Roth and traditional IRA in a given year.

When multiple retirement accounts make sense

Retirement plan with graphs and glasses
Retirement plan | iStock/Getty Images


There are some cases where having multiple retirement accounts makes sense, especially if it allows you to save more for the future.

If you’re married and your spouse doesn’t work, you can open a spousal IRA and make contributions on their behalf, up to the contribution limit.

If you already have a traditional IRA, you might consider opening a Roth IRA. With a Roth, you contribute money after you pay taxes on it. When you take the money out in retirement it’s tax-free. That could be a big bonus if you expect your tax rates to be higher in retirement than they are today. The downside is that you don’t get to deduct your contributions today. Because it’s impossible to predict what your tax situation will be in the future, having a mix of both tax-deferred savings and a Roth gives you the most flexibility, notes Morningstar.

There are also health savings accounts, or HSAs. These aren’t traditional retirement accounts. HSAs are designed to help people with high deductible health plans to set aside tax-free money to pay for healthcare expenses. But an HSA can also be a way to set aside more money for healthcare expenses in retirement, which are only expected to grow in the future.

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