Should I combine my 3 IRA accounts to make withdrawals easier?


Q. I have three separate IRA accounts. One is a rollover IRA where my contributions were “pre-tax” for New Jersey, so I will owe New Jersey income tax on my total RMD withdrawals from this account. My contributions to my other two IRA accounts were “after tax” for New Jersey, so I already paid income tax on my contributions. I have to begin taking RMD withdrawals next year. Should I combine all three IRA accounts into a single IRA account? Would that make it easier or more difficult to calculate the taxable portion of my RMD withdrawals each year?
— Investor

A. You’re correct that determining taxes on your minimum distributions can be confusing, especially when you have accounts that are both pre- and after-tax.

There are several things to consider here.

First, it’s important to keep your pre-tax accounts and your post-tax accounts separate, said Jodi Viaud, a certified financial planner with Knox Grove Financial in Pennington.

For example, she said, your traditional IRAs, both pre-tax and post-tax, and your Roth IRAs should remain separate as they have their own set of rules and taxation.

Viaud said the distributions on each of these accounts will be taxed differently.

“Your IRA that is composed of pre-tax money is 100% taxable, whereas the post-tax IRA is only taxed on the growth,” she said. “If you combine these accounts, it will be much harder for you to track your initial contributions versus the growth on the account, and you may run the risk of being double taxed.”

You bring up Required Minimum Distribution (RMD), which is the amount of money that must be withdrawn from your tax-advantaged retirement accounts each year once you turn 72. As the name suggests, this is a minimum, but you can always withdraw more if desired, she said.

Many retirement accounts grow tax-free, which allows you to make tax-deductible contributions during your earning years, she said.

“When you turn 72, the government now gets to start receiving those tax revenues from your IRAs,” she said. “In other words, time to pay up.”

Viaud said when you withdraw these distributions from the IRA, you will still want to track your pre- and post-tax contributions so that you only pay tax on the growth or the pre-tax contributions.

So yes, keep those accounts separate.

Viaud calls consolidating your two tax-deferred IRAs a viable option if they are both taxed in the same manner.

“You may want to consolidate your accounts for simplicity which will give you less statements, financial institutions, or financial advisors with which to deal,” she said. “There may also be cost savings depending on the institution, your level of assets, or type of investments. Another reason you may consider consolidating your tax-deferred IRAs is the ease of calculating your RMD from one account, as opposed to calculating each individual account every year.”

But let’s play devil’s advocate for a moment. Why would one consider having multiple IRA accounts?

The answer is diversification, she said.

“There may be certain investment strategies assigned to each IRA account. For example, you may have one that is more conservative and focused on producing current income, and another account that is designed for growth and appreciation for the long term,” she said. “Make sure you are looking beyond the simplicity and convenience of consolidating your accounts, and that your assets are appropriately allocated for your specific financial planning and investment needs in retirement and beyond.”

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This story was originally published on Nov. 17, 2022. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.