Roth IRA Conversions: Multiple Roths vs. Single Roth

Submitted by Kimberly Crocker on Wed, 2010-12-15 20:14

My husband has a Traditional IRA, SEP IRA and Corporate SEP IRA. He’s doing a partial conversion of the SEP IRA today. Putting recharacterization aside:

1) If he wants to convert the balance of his SEP IRA, can he convert into this same Roth IRA or must it be a new and separate Roth IRA?

2) If he want to convert his Traditional IRA, can he convert into this same Roth IRA or must it be a new and separate Roth IRA?

Are the guidelines simply that you can use a single Roth IRA for all conversions as long as the Name and SSN are the same on all IRA accounts?

He is inclined to have just one Roth IRA in his lifetime. Is this short-sighted?

Thanks for your input,
Kim

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Permalink Submitted by Alan Spross on Wed, 2010-12-15 22:31

1) Can be either way. Recharacterization simplification is the only reason to use multiple Roth accounts.
2) Same as above. Note that a SEP IRA is just a variety of a traditional IRA. Distribution considerations are identical. The contribution rules are where they differ.

Yes, no reason to create more than one Roth IRA unless he is undertaking various recharacterization strategies such as cherry picking the best performers and recharacterizing the others. Or if he wanted to name different beneficiaries on the different Roth accounts.

Roth IRA tax rules on distributions contemplate all Roth accounts as one combined account anyway.