کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
359375 | 620155 | 2015 | 18 صفحه PDF | دانلود رایگان |
• Textbook treatment of retirement savings often focuses on technical details.
• A fundamental analysis of the tax benefits of retirement savings is presented.
• Four interacting benefits are identified; three derive from deferred taxation, while one is a product of tax code progressivity.
• A problem of deciding how to allocate equity and bond investments is analyzed.
• Classroom implementation issues are discussed.
Typical textbook treatments of tax-advantaged retirement savings plans focus on legalistic characteristics such as contribution limits and early withdrawal penalties. Popular press articles on these plans often present a myriad of details on the effects of inflation, rates of return, expected tax rates, ordinary income versus capital gains treatment, and other items that tend to obscure their fundamental tax advantages. The goal of this teaching note is to expose the fundamental tax advantages of retirement savings plans by conducting an analysis of a simplified tax setting. We identify four interrelated benefits of existing retirement plans – tax-deferred contributions, tax-deferred earnings, never-taxed earnings, and income smoothing with progressive tax rates. We also provide a more in-depth analysis of the choice between the two most popular forms of retirement savings, traditional and Roth accounts. An understanding of the properties of the tax benefits of retirement savings can be useful for students who are preparing for careers as tax professionals, as well as individuals who wish to understand the financial planning advice they receive.
Journal: Journal of Accounting Education - Volume 33, Issue 2, June 2015, Pages 164–181