A reexamination of tax-deductible IRAs, Roth IRAs, and 401k) investments

Authors

  • Stephen M. Horan Department of Finance, St. Bonaventure University, St. Bonaventure, NY 14778, USA
  • Jeffrey H. Peterson Department of Finance, St. Bonaventure University, St. Bonaventure, NY 14778, USA

DOI:

https://doi.org/10.1016/S1057-0810(02)00095-1

Abstract

Choosing among various tax preferred investment vehicles for retirement planning requires individuals or financial planners to make assumptions about how potential tax savings are to be invested. This paper extends the work of previous studies that assume tax savings are invested in vehicles that are either tax-deferred or taxed each year as ordinary income. We assume tax savings are invested in a typical taxable mutual fund that contains implicit tax-deferral characteristics and ®nd that the results are sensitive to these assumptions. We also extend the analysis to examine employer- sponsored 401(k) plans that match some or all of an employee's contributions and ®nd that only modest employer contributions are necessary for 401(k)s to dominate Roth IRAs. Copyright 2001 Elsevier Science Inc. All rights reserved.

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Published

2001-12-30

How to Cite

Horan, S. M., & Peterson, J. H. (2001). A reexamination of tax-deductible IRAs, Roth IRAs, and 401k) investments. Financial Services Review, 10(1-4), 87–100. https://doi.org/10.1016/S1057-0810(02)00095-1

Issue

Vol. 10 No. 1-4 (2001): Financial Services Review

Section

New Original Submission

License

Copyright (c) 2001 Elsevier Science Inc.

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