It’s Ok to Hold the Same Investment in Multiple Accounts
Hi Friendos,
We’re back for a few more 401k summer school sessions, because I declare that summer should last until Labor Day. And today we’ll talk about how it is ok to own the same investment inside multiple accounts.
First, a comment on the having of multiple accounts. Having many investment accounts is not a marker of sophistication, it just means you have a lot of accounts. Having too many accounts could be a sign of administrative neglect. There is a “right” number for you, and that is where each account has a present-day reason for being in your life.
It could be that one investment account is perfect for you, because the dollar amount of your retirement savings fits within the annual contribution limits, so you have no need of a second investment account, including a “regular” brokerage account. Great! The tax advantage of a 401k means that, for money you are setting aside specifically for retirement, you should be maxing out your 401k (or an IRA) before investing anything in a regular brokerage account. Tax break beats no tax break.
Ok, so let’s say you’re a freelancer and are pretty sure you’ll earn about $80k this year (that’s profits from your freelance work, so, the amount leftover after you’ve paid your business expenses). You decided to set aside 15% for retirement, so that’s $12,000. You contributed $7,500 to your existing IRA account (the 2026 max) which is invested in a target date fund. Where to put the other $4,500? Robinhood? Ahem, how about a solo 401k or SEP IRA? That’s the way for an entirely self-employed person to access additional space for tax-advantaged retirement saving.
Maybe you have your IRA account at Fidelity and own the Fidelity Freedom Index 2050 Fund, a nice target date fund that only charges a fee of 0.12% per year. If you decided to open a solo 401k, you might also do that at Fidelity, for administrative convenience. And if that 2050 fund is a good choice for your IRA, it will also be a good choice for your new solo 401k.
A few weeks ago I said that “Owning just one fund does not mean all your eggs are in one basket, because a target date fund will have many proverbial baskets inside of it… like an expertly packed suitcase with everything you need for your trip in the quantities you need.” In this scenario, taking full advantage of the retirement saving tax breaks created by Congress means you must have two investment accounts instead of just one, so go ahead and do that. It’s like creating a second suitcase packed in the same way as the first suitcase.
We should not have to struggle with these administrative hassles, but here we are. The 1% are enjoying these tax breaks to their maximum, so I’d like you get yours too.
-Stephanie
Frequently Taxed Questions 