Abstract
<p class="MsoNormal" style="text-align: justify; margin: 0in 37.8pt 0pt 0.5in;"><span style="font-family: &quot;CG Times&quot;,&quot;serif&quot;; mso-bidi-font-style: italic;"><span style="font-size: x-small;">With the recent introduction of the Roth Individual Retirement Account (IRA) along with a significantly improved Traditional IRA, there has been considerable interest in comparing the performance of these investment vehicles.<span style="mso-spacerun: yes;">&nbsp; </span>Some confusion regarding these comparisons has evolved.<span style="mso-spacerun: yes;">&nbsp; </span>In this paper we show that this confusion may be attributed to scale and tax differences between the two investment vehicles.<span style="mso-spacerun: yes;">&nbsp; </span>We adjust for these differences by focusing on the after-tax rate-of-return on investment for each IRA vehicle.<span style="mso-spacerun: yes;">&nbsp; </span>We find that performance depends crucially on the relationship between an individual&rsquo;s tax rates at the time of investment and at the time of withdrawal.</span></span></p>
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