It is the decision of the investor to decide which IRA is beneficial for him. This is best way to save money and enjoy the tax benefits after retirement. Different IRA has different tax benefits. To enjoy the tax benefits it is advisable for the investor to deposit money before the April 15 to get credit of the previous tax year. There are similarities between IRA and employer-sponsored 401(k) plans. Investors are also allowed to keep both the accounts but if you withdraw money before the time of retirement you may be charged with penalty.

Traditional IRA

In a Traditional IRA the investor gets the benefit of tax deduction as he donates to the account, and the claims of the taxes are also deductible. The main advantage of traditional IRA is the benefit of tax deductible. For instance if a person deposits $4000 in the traditional IRA so its twenty-five percent will be marginal then $1000 will be the benefit will be given for the year. There is a yearly limit of amount to be deposited in the traditional IRA and it may change on timely basis. If the person has a regular income then it may subject to taxation during the time of retirement, and on the other hand if withdrawals done before retirement will be charged with penalty. Traditional IRA offers incentives if the person has a lower tax bracket during retirement.

Roth IRA

Roth IRA is named for its chief legislative sponsor, William Roth the late Senator of Delaware.  This is an another type of IRA in which the person will not get tax benefits immediately so in this account the amount of claimed taxes will not get reduced. In Roth IRA the amount will be invested in various investments like mutual funds, securities or certificates of deposit. If a person withdraws early then the retirement then he will not be charged with the penalty. There is not tax in case of long-term capital gains but the benefits from investment earnings will be taxable income.

Additional IRA

There are many retirement saving options besides Traditional IRA and Roth IRA. Every IRA has different benefits and plans. A SEP IRA is beneficial to business owners to provide retirement benefits to owner and employees. A SIMPLE IRA is beneficial for the employees to save money and use it later when needed and is setup for the employer-provided plan. All these IRA’s have same rules as traditional IRA like if employer donates will get tax deductions on the invested income.

Roth IRA with many Financial Institutions

You can hold Roth IRA with multiple financial institutions but all your accounts will be treated as one, even if they are of same company. Your contribution to Roth IRA applies to the total of all accounts this can be done to save tax. For instance, if you are above 50 your limit is $6000 and if you are below 50 your limit is $5000 now if you have more then one Roth IRA your over all limit will be $5000 including all accounts you can have $2500 in one account and $0 in another. But you limit of $5000 will not exceed, no matter how many accounts you have. If you are unable to pay the limit in a particular month because of your fewer earnings you can also pay the remaining after some months. And if you put it in a single IRA that includes contributions and earnings from many years then it can be difficult to know how many your earnings are.

Multiple Roths with a single institution

You can easily open multiple Roths with a single institution but all will be treated as one. You have a particular limit of amount which you have to maintain in all your Roths account, no matter about the multiple Roths you have with single or many institutions.

More Control on Beneficiaries

There is a good advantage of holding multiple IRA accounts in case of control over beneficiary. You can also put multiple beneficiaries if you have a single Roth IRA account, each beneficiary will receive equal share of your money. You can contribute your money directly through IRA account if you want to give your money to wife or children. For instance if you want to give 80 percent of your money to your wife and 20 percent to your child, you can contribute 80 percent directly through IRA account of your wife and 20 percent to your child.

Diversification and hedging

Another benefit of holding multiple Roths is that it diversifies your investment through multiple accounts. It helps you and act as a backup for the accounts which are not performing properly.

Disadvantage of holding multiple Roths

It is sometimes hard to maintain the record of multiple accounts and you also have to pay multiple service charges. It will be easy for you to hold a single account and get benefits.