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With the yearly contribution limit of an IRA being $5500, are you allowed to open mutliple IRAs and does this make sense? I was curious what people who want to invest more into a retirement account but don't have a 401k usually do.

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are you allowed to open multiple IRAs?

Yes - but the contribution limit applies to all IRAs in total, so you cannot go over that limit by contributing to multiple IRAs.

I was curious what people who want to invest more into a retirement account but don't have a 401k usually do.

Invest in non-retirement accounts:

  • 529 and other education savings plans are good alternatives if you have children that will be attending college

  • health savings accounts are pre-tax, and grow tax-free if they are used for qualified medical expenses. The maximum tax deduction for HSAs for 2017 is $6,750 for family coverage.

Depending on your situation, you might also be able to open a spousal IRA, which will allow you to contribute to an IRA for your spouse in his/her name, meaning that the account is fully owned by them and not you.

  • Thanks. I didn't know the contribution limit was for all IRAs. That's good to know. – Rich Jul 24 '17 at 20:29
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    It might be worth emphasizing the "all" in your first sentence and pointing out that the sum total of all IRA contributions (both Traditional and Roth) is subject to the $5500 annual limit ($6500 for people over 50); it is not $5500/6500 for the Traditional IRA and another $5500/6500 for the Roth IRA. – Dilip Sarwate Jul 25 '17 at 2:27
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D Stanley's answer is good, but I'd add a couple of other things to think about:

  • Am I correct in reading the SEP-IRA as saying that if you make too much to contribute to an IRA, you should change to self employed and hire yourself out to your current employer at the same rate but as an independent contractor, and then magically you will be able to contribute to an IRA? – Michael Jul 25 '17 at 2:10
  • @Michael there are many differences in being self employed than just retirement contributions. you also meed to consider self employment tax and insurance consequences. – D Stanley Jul 25 '17 at 2:30
  • @Michael : As D Stanley says, "the same rate" will need to be thought about correctly to include the extra employment taxes (which you only play half of as a regular employee) and the availability of health insurance (don't get me started on the accepted serfdom of health insurance being tied to your job and not being transferrable)... and any other benefits (vacation time, stock options, bonuses, etc). The company I left had a "benefits calculator" that showed everything in $$ terms; that was instrumental in showing me what I needed to do to be self-employed. – Peter K. Jul 25 '17 at 11:09

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