Investing In Traditional And Roth Retirement Plans

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Investing In Traditional And Roth Retirement Plans
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New UA Eller Research Challenges Conventional Advice About Investing In Traditional And Roth Retirement Plans

Findings show a mix is optimal, and the largest economic benefits from Roth investments accrue to investors with high current income

TUCSON, Ariz. – August 22, 2016 – New research coming out of the University of Arizona Eller College of Management has important practical implications for retirement savers, suggesting that the advice that many investors are receiving is not optimal.

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The study, entitled Tax Uncertainty and Retirement Savings Diversification, was co-authored by UA Eller College finance professors Scott Cederburg and David C. Brown and University of Missouri finance professor Michael S. O’Doherty.

The professors developed software to account for tax uncertainty when analyzing investors’ contributions between pre-tax traditional and post-tax Roth versions of tax-advantaged retirement accounts. Historically, taxpayers have faced considerable uncertainty regarding future tax rates. Since 1913, for married taxpayers with an inflation-adjusted income of $100,0