How to Combine IRA Accounts

IRAs allow your money to grow tax-free or tax-deferred.
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An individual retirement account provides important tax benefits that encourage people to sock money away for their later years. Investments in an IRA can grow tax-free. In a traditional IRA, you grab a tax-deduction for the money you contribute, but must shell out taxes at your marginal tax rate on money you withdraw. Roth IRAs give you no tax deductions, but if you follow the rules, you can siphon your money out tax-free. You can have multiple IRA accounts and can combine them as you wish.

IRA Custodians and Trustees

A custodian or trustee maintains an IRA account to meet federal regulations, for the benefit of you or your beneficiaries. Banks, credit unions, savings and loan associations, stockbrokers, mutual funds, life insurance companies and other financial institutions can serve as IRA custodians and trustees. Trustees normally make investment decisions on behalf of the IRA owner, whereas custodians do not. You can have multiple IRA accounts with different custodians and trustees. For example, you might have IRAs set up at a number of different mutual funds.

Benefits of Combining IRAs

Each separate IRA will send you Internal Revenue Service Form 1099-R at the beginning of the new year reporting last year’s distributions. You must report these numbers in your tax return, along with contributed amounts. Combining IRAs means less paperwork for you. It also might be easier to keep track of your investments if combined into a single IRA. Brokerage accounts normally give you access to many mutual fund families, so that you don’t have to set up accounts with each mutual fund company. If you combine your IRAs into a self-directed account, you’ll have the most investment choices, including real estate and certain precious metals.


The easiest way to combine IRAs is through a trustee-to-trustee transfer. You arrange this by contacting the current custodian or trustee and requesting a transfer to another IRA. A transfer is not a distribution. It therefore is tax-free, has no deadlines and you can do transfers without any waiting periods between them. If you wish to convert between a traditional and Roth IRA, you might be able to keep the same custodian. However, you can't combine Roth and traditional IRAs in the same account.


Another method of combining IRAs is through a rollover, in which you withdraw money or property from one IRA and deposit it in another. A rollover is tax-free if you finish it within 60 days of taking a distribution. If you take longer, the IRS will treat the distribution as taxable income -- unless it is a tax-free distribution from a Roth IRA. You might also be hit with an early withdrawal penalty tax of 10 percent. You can roll over any one account only once per year. If you roll over property, it must be exactly the same property distributed to you. You must report rollover distributions on Form 1040 of your tax return, even if tax-free.


If you convert a traditional IRA into a Roth account, you usually will owe taxes on the amount converted, except for nondeductible contributions you made to the traditional IRA. Nondeductible contributions can occur when you or your spouse are also enrolled in a qualified employer plan. If you make a partial conversion, you must prorate your nondeductible contributions. If you roll over non-IRA qualified employer plans into an IRA, the plan custodian will withhold 20 percent of your money for taxes. If you don’t make up the 20 percent from your own pocket, the IRA will tax it as a distribution. You normally get back the withheld amount when you next file your tax return. If you instead perform a trustee-to-trustee transfer from your employee plan, you avoid the withholding tax.

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