The Effect of the Tax Cuts and Jobs Act on the Choice between Traditional and Roth IRAs

This paper analyzes the impact of the tax cuts and jobs act on the income taxeffectiveness of the Roth IRA versus the traditional IRA for investors who maximizetheir contributions prior to retirement. Since the tax cuts and jobs act reduced marginalincome tax rates, the tax benefits gained from a traditional IRA decrease compared toa Roth IRA. Based on set investment parameters, an investor makes monthly paymentsto the IRAs for a specific period and the tax savings obtained from the traditional IRAare reinvested into a separate taxable account. The after-tax accumulation of wealth ineach account is calculated to determine which IRA produces the largest available aftertax withdrawals after retirement. A break-even analysis is also constructed to determinethe marginal income tax rate and investment return that makes an investor indifferentbetween the two IRAs. The results illustrate that the decision to invest in a traditionalIRA versus a Roth IRA depends on both the rates of return and whether the marginalincome tax rate is the same or different during the contribution and withdrawal periods.

Tax Retirement Savings Decisions Using an Excel Spreadsheet Approach

ABSTRACT Accounting academia and professional organizations alike emphasize the need for the integration of technology and information systems into the accounting curriculum. This case integrates taxation concepts (individual retirement savings) and information systems and technology skills (advanced Excel). The case, which can be implemented at the undergraduate or graduate level, requires students to use advanced Excel technical functionality to calculate the tax implications of retirement investing scenarios using three specific types of tax-deferred retirement accounts—a traditional 401(k), a traditional IRA, and a Roth IRA. As many students who complete this case will work for public accounting firms that offer retirement plans, they will benefit academically, professionally, and personally from the knowledge and skills learned in this case.

How To Invest Your IRAs In Profitable Real Estate IRAs

Since the inception of Individual Retirement Accounts (IRAs) in 1974, the public has been advised strongly by bankers, accountants (CPAs), and investment advisors that the best strategy for IRA holdings is investment in stocks or bonds. Unfortunately, with the sharp decline in the market value of stocks and the bottoming out of interest rates in the past years, most IRA funds have performed very poorly and investors have witnessed how drastically their retirement savings lost their accumulated value. During these years, apparently, not many investment advisers have bothered to consider other alternative ways for investing accumulated IRAs and pension funds. There is, in fact, another viable investment alternative that offers both safety and a considerable growth rate. That is real estate IRAs. The purpose of this paper is to explain (a) why the traditional and Roth IRA should be invested in real estate, b) the steps involved in establishing a sound real estate IRA, (c) the restrictions and the dos and don’ts of investing in a real estate IRA, and (d) the tax and penalty consequences of incorrect investment in a real estate IRA.

The Roth Versus The Traditional IRA: A Comparative Analysis

<p class="DefaultText" style="text-align: justify; margin: 0in 0.5in 0pt; tab-stops: right .5in;"><span class="InitialStyle"><span style="font-family: &quot;CG Times&quot;,&quot;serif&quot;; font-size: 10pt; mso-bidi-font-family: 'Times New Roman';"><span style="mso-tab-count: 1;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>This study provides economic analyses that allow wealth accumulation comparisons between a traditional IRA and Roth IRA.<span style="mso-spacerun: yes;">&nbsp; </span>We performed economic analyses involving an investor with fixed pre-tax earnings or wealth available to invest in either the traditional or the Roth IRA, but not both.<span style="mso-spacerun: yes;">&nbsp; </span></span></span><span style="font-family: &quot;CG Times&quot;,&quot;serif&quot;; font-size: 10pt;">These analyses have shown that the traditional IRA has significant wealth accumulation advantages over the Roth IRA in all but rare circumstances.<span style="mso-spacerun: yes;">&nbsp; </span>In our analyses, the traditional IRA outperforms the Roth IRA by accumulating more wealth available at retirement.<span style="mso-spacerun: yes;">&nbsp; </span>Thus, our findings demonstrate that the Roth IRA is inferior to the traditional IRA as a wealth accumulation vehicle in all but rare circumstances.</span></p>