Can I Split My Traditional IRA Into Two Accounts?

Traditional IRAs allow you to save tax-deferred, with investments growing tax free while withdrawals will only be subject to ordinary income tax rates upon retirement.

Many IRA owners may have collected multiple accounts from previous jobs or rolled over 401(k)s, and wonder whether consolidating them could help simplify planning and reduce fees.


Traditional IRA contributions may be tax-deductible depending on your income level, while investments held within it grow tax-deferred until withdrawals. Depending on your future tax rate, this could prove very advantageous; speak to a Thrivent financial advisor on how best to fund it so as to take full advantage of its tax benefits.

If you anticipate that you will be in a lower tax bracket during retirement than now, traditional and Roth IRA accounts might make sense for you. Withdrawals made prior to age 59 1/2 will incur both income taxes and an early withdrawal penalty (unless an exception applies). At retirement age, minimum distributions (RMDs) must start being taken on April 1 of the year following turning 72; IRS Publication 590 provides more details. You must also pay income taxes on nondeductible contributions made into an IRA as well as earnings on withdrawals made from it.


Traditional IRAs allow you to invest pre-tax dollars tax-free until retirement, which provides significant tax advantages over placing the same sum in a taxable brokerage account that would instantly incur taxes.

Annual contributions to an Individual Retirement Account (IRA) or workplace savings plan, like a 401(k), are limited by earned income, though self-employed earnings could potentially exceed this threshold.

Investors with Individual Retirement Arrangements (IRAs) have access to a variety of investment choices in an IRA, such as stocks, mutual funds and exchange-traded funds (ETFs). It is generally best practice to diversify the assets held within an IRA account in order to achieve optimal returns.

At age 59 1/2, withdrawals from an Individual Retirement Account (IRA) without incurring penalties can be taken without penalty if used for qualified expenses like home purchase or unreimbursed medical costs; any other use could incur an early withdrawal penalty of 10%. If you’re thinking about tapping early into your IRA savings, consult an independent financial advisor – SmartAsset’s free tool matches you up with independent advisors in your area who can discuss all available options with you.


The IRS lays down strict rules regarding when it’s permissible to withdraw money from an IRA. Anyone withdrawing before turning 59.5 must pay income taxes on any taxable portion. Furthermore, anyone over that age must adhere to required minimum distributions (RMDs) or face penalties.

These rules are universal for traditional, SIMPLE, and SEP IRAs; with certain exceptions. You will typically have to pay an early withdrawal penalty of 10% when withdrawing funds prior to age 59 1/2 unless they’re used to purchase a home, cover qualified higher education expenses or are permanently disabled.

Trustee-to-trustee transfers offer the most tax-efficient method of taking distributions from an IRA, as they allow for asset movement without incurring taxes or penalties. They’re also the optimal solution if you’re going through a divorce and need to separate IRA assets between accounts; for this, a Qualified Domestic Relations Order, or QDRO, may be needed.


When inheriting an IRA, it’s essential that the beneficiary designations are updated, since these designations take precedence over any instructions in a will. Beneficiaries can either be individuals or trusts as long as they can legally own and control the assets in question.

If the beneficiary is their spouse, they can elect to treat the account as their own and postpone making required minimum distributions until age 59 1/2; otherwise they must withdraw all funds within 10 years or face a 10% penalty.

Avoid penalties and decrease tax burden by making regular withdrawals over your lifetime, known as stretching distributions. But this strategy requires discipline as you must reinvest any excess dollars back into retirement savings accounts for equal after-tax dollars; or transfer them directly into taxable accounts if needed for first home purchase or unreimbursed medical costs.

Raymond Banks Administrator
Raymond Banks is a published author in the commodity world. He has written extensively about gold and silver investments, and his work has been featured in some of the most respected financial journals in the industry. Raymond\\\'s expertise in the commodities market is highly sought-after, and he regularly delivers presentations on behalf of various investment firms. He is also a regular guest on financial news programmes, where he offers his expert insights into the latest commodity trends.

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