AffiliationUniv Arizona, Eller Coll Management
MetadataShow full item record
PublisherELSEVIER SCIENCE SA
CitationBrown, D. C., Cederburg, S., & O’Doherty, M. S. (2017). Tax uncertainty and retirement savings diversification. Journal of Financial Economics, 126(3), 689-712.
JournalJOURNAL OF FINANCIAL ECONOMICS
Rights© 2017 Elsevier B.V. All rights reserved.
Collection InformationThis item from the UA Faculty Publications collection is made available by the University of Arizona with support from the University of Arizona Libraries. If you have questions, please contact us at firstname.lastname@example.org.
AbstractWe investigate the optimal savings decisions for investors with access to pre-tax (traditional) and post-tax (Roth) versions of tax-advantaged retirement accounts. The model features a progressive tax schedule and uncertainty over future tax rates. Traditional accounts are valuable for hedging retirement account performance and managing current income near tax-bracket cutoffs, whereas Roth accounts allow investors to mitigate uncertainty over future tax schedules. The optimal asset location policy for most households involves diversifying between traditional and Roth vehicles. Contrary to conventional advice, the substantial economic benefits from Roth investments are not limited to investors with low current income. (C) 2017 Elsevier B.V. All rights reserved.
Note36 month embargo; published online: 6 October 2017.
VersionFinal accepted manuscript