No Limits on Different Accounts

• The IRS makes no attempt to restrict how many IRAs you can have, so you are entitled to create different IRAs at two banks. For example, you might prefer one bank's mutual fund performance but the second bank's certificate of deposit rates. The annual contribution limits, however, cover all the IRAs you have, whether you have them at one bank or two banks. For example, in 2011, the contribution limit equals $5,000, so if you put $5,000 in the IRA at one of the banks, you cannot make a contribution to the IRA at the other bank. (The IRA contribution limit for people age 50 and older is $6,000.)
  
  

Higher FDIC Limits

• When you put money in two banks, your covered limits under the Federal Deposit Insurance Corporation count separately toward each bank. As of 2011, the FDIC covers up to $250,000 of IRAs at each institution in covered accounts. Covered accounts include certificates of deposit, money market accounts and savings accounts. For example, if you have $215,000 in CDs at each bank, the entire amount would be covered. However, if you have $430,000 in one, only $250,000 is covered. If, however, you have your IRA invested in uncovered accounts, such as stock or mutual funds, the extra coverage does not benefit you.
  
  

Advantages

• Besides being able to take advantage of the higher FDIC limits, you also benefit from having two IRAs when it comes to rollovers and early distributions. One way to avoid the early withdrawal penalty on IRA distributions is to take equal distributions for the longer of five years or the period until you reach age 59 1/2. In addition, you are limited to one rollover per account per 12-month period, so if you need to perform multiple rollovers, you can do so if you have two separate IRAs.
  
  

Disadvantages

• Some banks will give preferential treatment or lower fees if you meet certain account balance thresholds with your IRA. For example, a bank may be willing to offer a higher interest rate on a certificate of deposit if you put in $500,000 rather than only $250,000. Similarly, you may receive a lower account management fee or more personalized attention from bank brokers if you have a higher account balance.