Determinants of the Choice Between Roth and Deductible IRAs

1 Pages Posted: 7 Oct 2006

See all articles by Warren B. Hrung

Warren B. Hrung

Federal Reserve Bank of New York


This study examines tax and non-tax determinants of the choice between Roth and deductible Individual Retirement Accounts (IRAs). I find evidence that higher current tax rates relative to average tax rates are positively, but modestly, related to the probability that a taxpayer will contribute to a deductible IRA rather than a Roth IRA. I also find that taxpayers with greater liquidity are more likely to choose a Roth IRA, which is the option with a higher effective contribution limit. The results relate to the question of whether taxpayers behave in a tax-efficient manner and the behavioral response to statutory tax rate changes.

Keywords: Individual Retirement Accounts, taxes

JEL Classification: H24, E21

Suggested Citation

Hrung, Warren B., Determinants of the Choice Between Roth and Deductible IRAs. Journal of the American Taxation Association, Vol. 29, No. 1, pp. 27-42, Spring 2007, Available at SSRN:

Warren B. Hrung (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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