March 2, 2012
Smart investors choose Roth IRAs over traditional IRAs, according to a recent study by Texas Tech University. The researchers determined that people with high IQs were the most likely to own a Roth IRA, even after controlling for education, income, and net worth.
“When the government creates a tax incentive, it creates an advantage for people who have the sophistication to be able to figure out the value of that incentive,” says Michael Finke, an associate professor of personal financial planning at Texas Tech University and coauthor of the report. “With a Roth IRA, you are not getting any immediate advantages. You are essentially locking up your moneywith the threat of a fee in order to get a long-term benefit.”