Consolidating Your IRAs

May 12, 20203 min read
Consolidating Your IRAs
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Having too many IRA accounts in different places can be distracting. As there is generally no real advantage to having multiple IRAs, it’s important to be cognizant of the rules that must be followed when trying to roll them into one, in the event that you need to. Here we take a closer look at how to go about consolidating your IRAs.

IRA rules are aggregated

The contribution and distribution rules governing IRAs are aggregated for any and all types of IRAs you might have. This means that even if you have more than one IRA, you can’t contribute more than the total contribution limit across all of your IRAs. Similarly, there is also no difference in the distribution rules regardless of the number of IRAs you have. You’re able to consolidate the same type of IRAs without having to pay taxes on them, and with no negative consequences for doing so.

What happens when an IRA is inherited?

You are not able to combine an inherited Traditional IRA with another Traditional IRA or contribute to that inherited IRA. This is because your inherited IRA has a required minimum distribution requirement unless you inherited it from your spouse or you are disabled or chronically ill. In these cases, you can treat your inherited IRA as if it were your own regular IRA. It’s important to be familiar with the rules surrounding required minimum distributions for different types of IRAs. 

What happens with Simplified Employee Pension (SEP) IRAs?

If you have a SEP IRA, you can roll that into another IRA that is not a SEP IRA and you can always make your non-SEP IRA a SEP if you need to. If you don’t make your IRA a SEP, then you will not be able to make a larger contribution to it until you do. This may or may not be an issue for you. If it is an issue, you can turn in Form 5505 form to the administrator of your IRA that is not a SEP and make it a SEP.  


Things to remember when consolidating your IRAs

One thing to be careful of when combining IRAs is that you only get one IRA-to-IRA distribution and rollover in any single 12-month period. This is where you request a distribution from an IRA and roll those funds into the same or another IRA within 60 days. This would normally be a non-taxable event, but the second distribution cannot be rolled into another IRA if it happens within 12 months of your last rollover of this type. A distribution and rollover from an IRA to an employer-sponsored plan does not have this constraint. Neither does a distribution from an employer-sponsored plan to an IRA have the once in 12-months constraint. You can do as many of these as you like. You can roll your other IRAs into a Yieldstreet IRA quite easily. We’ll discuss this in more detail in our video on depositing money into your Yieldstreet IRA. 

Please note, Yieldstreet cannot provide tax advice, please consult a tax professional for advice specific to your situation. Learn more about how you can take retirement planning to the next level with a Yieldstreet IRA. Contact us at [email protected] with any questions.