Analysis of investment choices for retirement
a new approach and perspective
DOI:
https://doi.org/10.1016/S1057-0810(01)00083-XKeywords:
Long investment horizons, Retirement planning, Roth IRAs, Deductible IRAsAbstract
This paper evaluates deductible individual retirement accounts (IRAs), Roth IRAs, non-deductible IRAs, and open taxable investments using equal initial after-tax investments for the different choices. The concept of a break-even tax rate at the time of withdrawal of funds is used to analyze optimal choice between the deductible IRA and the Roth IRA. The break-even tax rate is seen to be a decreasing function of rate of return on the investment and the investment horizon. Regarding non-deductible IRAs, and open taxable investments, the findings indicate that the non-deductible IRA is the optimal choice for individuals with long investment horizons. Copyright 2001 Published by Elsevier Science Inc.
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Copyright (c) 2001 Elsevier Science Inc.
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