Each account has different limitations:
If you are younger than 50 years old, Roth IRAs have a maximum allowed contribution of $5,500 per year (in year 2015 and 2016).
If you are older than 50 years old, Roth IRAs typically allow a catch-up period to have a maximum allowed contribution of $6,500 per year (in year 2015 and 2016).
If you have multiple Roth and Traditional IRAs the aggregate annual contributions that you make to all of your IRA accounts must not exceed the annual contribution limit set by the IRS for the calendar year. If you over-contribute to either account, penalties may apply until the account is corrected.
Depending on your filing status or MAGI (modified adjusted gross income) you may qualify for different amounts of contribution allowed per account type (Roth or SEP IRAs). For example, you may not be allowed to make any Roth IRA contributions, but as an alternative you may be allowed to make SEP contributions based on the total earnings declared on your form 1099.
SEP IRAs permit you to make a maximum contribution of up to the lesser of (i) 25% of the compensation declared on your form 1099 or (ii) $53,000 (for 2015 and 2016 and subject to annual cost-of-living adjustments for later years).
You may have multiple SEP IRAs with other companies, but if you are employed by multiple companies and/or have other types of retirement accounts the maximum contribution you may be eligible to make may be lowered. In order to calculate your exact maximum contribution, please consult your tax professional.
Honest Dollar is an investment advisory firm that can facilitate the creation of a retirement account. While we are familiar with the requirements for establishing accounts for tax planning purposes, we do not offer tax planning advice. If you don’t already have one, we strongly encourage you to contact a tax professional that can provide you with a comprehensive assessment of your tax situation.