Comparing the Roth IRA to the Traditional IRA: An After-Tax Cash Flow Analysis

Axel Grossmann, Clarence Rose

Research output: Contribution to journalArticlepeer-review

Abstract

This article compares the after-tax returns for investors who maximize contributions in a Roth IRA versus investors who maximize contributions in a traditional IRA and, in addition, invest the annual tax savings generated from the traditional IRA deductible contributions into a separate taxable investment account. The results of this research study indicate that, when the investment parameters and marginal income tax brackets are similar, the Roth IRA investor can achieve higher after-tax returns over the traditional deductible IRA investor, even when the annual tax savings are invested by the traditional IRA investor.
Original languageAmerican English
JournalJournal of Financial Service Professionals
Volume66
StatePublished - Sep 2012

Disciplines

  • Business Administration, Management, and Operations
  • Finance and Financial Management
  • Economics
  • Finance

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