March 20, 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 money with the threat of a fee in order to get a long-term benefit."