Return Heterogeneity in Retirement Accounts
44 Pages Posted: 20 Dec 2021 Last revised: 19 Aug 2022
Date Written: December 12, 2021
We study the performance of IRA pension plans from 2004 through 2018. We document novel evidence of large return heterogeneity across income groups in the US, and provide estimates of its impact on wealth inequality. High-income households substantially outperform low-income ones, and this return differential is almost three times as large in “tax-free” Roth IRAs. These returns cannot be matched by equity market returns, but are consistent with high-income individuals having exposure to private assets.
Keywords: Roth IRA; Traditional IRA; Return Heterogeneity; Wealth Inequality; Retirement Accounts
JEL Classification: G50, G51, J32
Suggested Citation: Suggested Citation