One of the most important pieces of the retirement savings puzzle is the humble individual retirement account, or IRA.
These accounts are a great way for investors to put additional savings to work outside of their workplace retirement plans such as 401(k)s or 403(b)s. Even better is that IRAS offer tax deferral on gains, dividends and interest. And we all know that deferring taxes leads to larger nest eggs over the long haul.
For older workers, the IRA choice has been clear, despite the fact that they come in several flavors; they have habitually been drawn to traditional IRAs to park their savings. And there are many reasons why they tend to choose traditional IRAs over their Roth IRA sisters.
But those investors may want to rethink their choice. Roth IRAs work plenty well for older investors too.
Pay Now or Pay Later?
It seems that age plays a distinct role in just what kind of supplemental retirement account workers choose. According to data combed by the Investment Company Institute (ICI), more than a third of investors in Roth IRAs are under the age of 40. This compares to just 15% for traditional IRAs. And that age skew does make sense.