The National Underwriter reports that, popular with millennials, Roth IRAs have become the choice for the under-34 crowd’s retirement income. But recent data shows baby boomers might be missing out by sticking with traditional IRAs.
Investors under 34 years old have more than eight times more money in Roth IRAs than traditional IRAs, according to a recent T. Rowe Price study. Investors between 18 and 24 have more than 16 times more money in Roth IRAs. A greater preference for traditional IRAs emerged when the study looked at investors over age 50.
“The benefits of tomorrow’s tax-free retirement withdrawals with a Roth IRA far outweigh the benefits of today’s tax-deduction and other possible benefits with a Traditional IRA,” said T. Rowe Price senior financial planner Stuart Ritter. “Even though the Roth IRA contribution doesn’t qualify for an income tax deduction, decades of compounding tax-free money can generate more spendable income in retirement.”