Saving With Multiple IRA Accounts

Added June 25, 2004 by Ilyce R. Glink

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Summary: You are allowed to save for retirement with multiple kinds of retirement accounts. You can have your 401(k) and you can also open up a Roth IRA. It is also possible to have more than one of the same types of IRA account but in different investment firms. Keep your retirement accounts and don't dip into them for other things like a down payment on a home.

Q: Can a person have more than one IRA? Also, I'm not quite sure what to do with my 401(k). Should I put it into a savings account or a money market account or the stock market?

I'm planning to borrow from my 401(k) to buy a house someday, so I don't want to lose my investments. By the way, I have a fear of investing, probably from watching too much television news.

A: Yes, you can have several different kinds of retirement accounts -- if you qualify. For example, you can have your 401(k) and if your income is less than $95,000 (if you're single) or $160,000 (filing jointly) you can also open up a Roth IRA. It is also possible to have more than one of the same types of IRA account but in different investment firms. For example, if you worked for one company that offered a 401(k) plan, then left and went to work elsewhere, you could rollover your 401(k) into a self-directed IRA. At the end of your working life, you might have several self-directed IRAs invested with several different companies.

The answer to your question about investing your retirement funds is big enough to fill a book. (I know because I've written several books that include information about investing.) For a good primer, check out Mike Kavanaugh's new book, The REAL U Guide to Saving and Investing (www.realuguide.com). It's an easy-to-understand book that walks you through the basics when it comes to saving and investing your money for retirement.

As for borrowing from your 401(k) to provide the down payment for your first home, I'd rather see you save up separately for this down payment, or even get a 100 percent loan that does not require you put anything down.

Once you start dipping into your 401(k), it's easy to keep doing it and it becomes more difficult to pay back. Not only might you seriously sidetrack your retirement savings, but if you leave your job or are fired, you will have to pay back the entire amount in just a few months.

Try to set up a separate savings account for your down payment and deposit as much as you can each month into it. You'll be far better off in the long run.

Published: Jun 25, 2004

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