Skip to main content

Comparing a Traditional IRA and a Roth IRA: Theory Versus Practice

Buy Article:

$51.00 plus tax (Refund Policy)

Abstract:

Abstract

Financial planners often advise their clients to first take advantage of employer-sponsored 401(k) plans, especially those with matching employer contributions. They often recommend next that clients consider a traditional or Roth IRA, depending on their current eligibility and tax bracket. Generally, the traditional IRA tends to be preferable to the Roth IRA if one expects to be in a lower tax bracket during the retirement versus the contribution years. This preference could be impacted by the theoretical or the practical assumptions one could make as to the tax bracket effect, minimum distribution requirements, and the impact of withdrawals on the amount of Social Security benefits taxed. This research compares the traditional and the Roth IRA, examining both the theoretical and practical assumptions of client behavior. The results indicate that the best choice between the types of IRAs depends on whether the investor's actual behavior is consistent with theory or practice.

Document Type: Research Article

DOI: https://doi.org/10.1111/j.1540-6296.2010.01186.x

Publication date: 2010-09-01

  • Access Key
  • Free ContentFree content
  • Partial Free ContentPartial Free content
  • New ContentNew content
  • Open Access ContentOpen access content
  • Partial Open Access ContentPartial Open access content
  • Subscribed ContentSubscribed content
  • Partial Subscribed ContentPartial Subscribed content
  • Free Trial ContentFree trial content
Cookie Policy
X
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more