New Findings on Strategic IRA Investing
Journal of Wealth Management
This article explores the issue of strategic IRA investing, but does so from an unusual premise. Comparing the traditional IRA with the Roth IRA, the authors confirm the well-known conclusion that the Roth alternative is preferable if the income tax rate during the distribution period is greater than the tax rate during the accumulation period and vice versa. However, they take the analysis a step further, demonstrating that this conventional wisdom only holds, however, if the individual is investing only in an IRA. If an individual is making unsheltered investments and IRA contributions, the Roth IRA is preferable to the regular IRA when the two tax rates are equal. They conclude with a review of the implications of converting from a traditional to a Roth IRA.
Caliendo, Frank, W. Cris Lewis, and Tyler J. Bowles. “New Findings on Strategic IRA Investing.” Journal of Wealth Management 3(4, Spring 2001):49-53