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This may be a really silly question, but I was looking at my TD Ameritrade account online, and it says front and center that my maximum 2013 contribution is $5500.

I'm assuming the limit is imposed by the IRS, but is anything stopping me from opening up Roth IRA's with more than one company and contributing the maximum in each one? Would I be penalized?

  • Note that the $5500 doesn't include the additional amount that you can contribute if you are 50 or older. Both these numbers are set by the IRS, and have increased over time. – mhoran_psprep Mar 9 '13 at 14:38
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Nothing is stopping you from opening up Roth IRAs in different companies and contributing the maximum to each one, but if you don't withdraw contributions (and any earnings generated by the withdrawn contributions while within the IRA) so as to leave a total contribution of $5500 for 2013, then Yes, you will be penalized. You do not report contributions to a Roth IRA on your tax return, but companies report to the IRS on the IRA accounts they hold, and the contributions and withdrawals/distributions made each year into each IRA account. Each company will send you a copy of the form that it sent in to the IRS so you won't be blind-sided in this matter. You will then get a letter from the IRS informing you that you have to pay penalties (the technical term is a 6% excise tax) for over-contributing to your IRA. If you obdurately refuse to remove the excess contributions (and any earnings generated by the excess contributions), that tax will be assessed in the years following too, until the matter is set right..

Note also that the maximum allowable contribution is reduced (and ultimately eliminated entirely) for people with high Modified Adjusted Gross Income (MAGI). Some people make a contribution to a Roth IRA each year but then withdraw it in timely fashion when they discover that their MAGI is too high (often during the preparation of their income tax returns).

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    Just thought I'd mention, if you contribute to a Roth IRA and your MAGI ends up being too high, you can recharacterize as a non-deductible traditional IRA contribution instead of withdrawing. – Craig W Mar 8 '13 at 17:04
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For purposes of this question, the acronym IRA means Individual Retirement Arrangement. You can have as many accounts as you wish, with one broker or many. The IRA regs limit per year deposits. Yes, penalty for depositing above the maximum.

Note: The word Arrangement is essential to the intent of this answer, and in fact, the correct word to define this acronym, not account.

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