Can an Individual Have Multiple SEP IRAs?

You must be at least 21 years old, have worked for your employer for a minimum of three of the last five years and have earned at least ​$650​ for the year from that employer to be eligible to participate in a simplified employee pension plan. Union employees and nonresident aliens do not qualify. Eligible employees can participate in more than one SEP IRA – simplified employee pension individual retirement account. Contributions are limited based on your earnings for the year.

SEP IRA Retirement Plan Basics

According to IRS guidelines governing SEP retirement plans, you can set up an SEP for self-employment income you earn even if you participate in another employer-sponsored retirement plan. As a business owner who is eligible to participate in the SEP, you must open your own individual SEP IRA account to receive contributions. An employer may establish both an SEP and other retirement plan. If you work for more than one employer, each may set up a, SEP IRA and make contributions on your behalf.

Multiple IRA Accounts

Some people participate in more than one type of retirement plan, although eligibility, income requirements and annual contribution limits may vary. Not only can you set up more than one IRA account at different financial institutions, you may also contribute to different types of IRA accounts during the same year.

In the event you leave an employer before retirement age, you have several options when it comes to what to do with the funds from your SEP IRA. You can leave the account where it is, although the employer will no longer make contributions, roll it into a traditional IRA account or other employer plan or convert it into a Roth IRA. Another option is to take the balance of the account in cash, in which case you will owe taxes and may have to pay penalties.

IRA Contribution Limits

Although you can have more than one SEP IRA, your total contribution cannot exceed the annual combined limit the IRS allows. The maximum amount of the IRA contribution you can make to all accounts depends on your income level. For employees, the annual contribution limit for a SEP IRA is ​$13,500​ with a catch up contribution of ​$3,000​ for those over the age of 50. The contribution limit for a sole proprietor is ​25 percent​ of adjusted net business income.

In 2021, the maximum annual contribution you can make to all other IRA accounts is the smaller of ​$6,000​ or the amount of taxable income for the year. This rule applies if you are younger than age 50 at the end of the tax year. If you are age 50 or older before the year ends, you can make a combined contribution of ​$7,000​ or the amount of your taxable income – whichever is less.

Advantages of Multiple Retirement Accounts

Having fewer retirement accounts is easier for some people to manage because it involves less paperwork. However, based on your individual situation, it may be advantageous to own multiple retirement accounts. If you leave one job that had an SEP IRA and move to another job with the same plan, you may have a reason to keep your money in the old plan.

The plan may offer you better investment options than your new plan, or it may charge lower administrative costs. Still, some people choose to consolidate retirement plans to simplify the process of managing investments and to accrue fewer maintenance fees.