Retirement Account Options When Beginning a Career

Journal of Financial Service Professionals, May 2014

Kelley School of Business Research Paper No. 2014-07

6 Pages Posted: 13 Mar 2014

See all articles by Gregory G. Geisler

Gregory G. Geisler

University of Missouri at Saint Louis - Accounting Area

Jerry Stern

Indiana University - Kelley School of Business - Department of Accounting

Abstract

When college graduates begin their careers, they face a number of financial choices and obligations. Their choices typically include one or more retirement account options. The options generally include individual retirement accounts (IRAs) (Roth and/or traditional), 401(k) plans (Roth and/or traditional), and, possibly, 401(k) contributions matched by the employers. In this article, a decision-making hierarchy is provided. The hierarchy ranks all of the retirement account alternatives in order to facilitate choices that are tax efficient and maximize wealth. A simplified version of the ranking is as follows: (1) Roth 401(k) with matching employer contributions; (2) traditional 401(k) with matching employer contributions; (3) Roth IRA; (4) Roth 401(k); and (5) traditional 401(k).

Keywords: 401(k), Roth 401(k), IRA, Roth IRA, Matching employer 401(k) contributions

JEL Classification: H24

Suggested Citation

Geisler, Gregory Gerard and Stern, Jerry, Retirement Account Options When Beginning a Career. Journal of Financial Service Professionals, May 2014, Kelley School of Business Research Paper No. 2014-07, Available at SSRN: https://ssrn.com/abstract=2407540

Gregory Gerard Geisler (Contact Author)

University of Missouri at Saint Louis - Accounting Area ( email )

8001 Natural Bridge Road
St. Louis, MO 63121
United States

Jerry Stern

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States

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