Search Results
Title: Bounded Rationality Strikes Again: The Impact of Cognitive Ability and Financial Planners on Roth IRA Adoption and Ownership
Resulting in 1 citation.
| 1. |
Cummings, Benjamin F. Finke, Michael S. James, Russell N. III |
|
Bounded Rationality Strikes Again: The Impact of Cognitive Ability and Financial Planners on Roth IRA Adoption and Ownership Working Paper, Social Science Research Network, March 2013. Also: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1968984 Cohort(s): NLSY79 Publisher: Social Science Electronic Publishing, Inc. Keyword(s): Armed Forces Qualifications Test (AFQT); Cognitive Ability; Financial Behaviors/Decisions; Financial Investments; Savings Permission to reprint the abstract has not been received from the publisher. Roth IRAs were introduced in the late 1990s and provide another option for tax-sheltered retirement savings. Because determining the benefits of a Roth IRA is a complex decision, we hypothesize that cognitive ability and having a financial planner have significant impacts on the timing and likelihood of using a Roth IRA. Using data primarily from the 2004 and 2008 administrations of the National Longitudinal Survey of Youth (NLSY), we find that greater cognitive ability and having a financial planner are both positively related to Roth IRA ownership and earlier adoption. If individuals with higher cognitive ability and/or a financial planner are better able to recognize and implement beneficial tax strategies, then tax policy will yield unintended distributional consequences. The complexity of a tax policy also limits its ability to modify individual behavior in the ways envisioned by policymakers. |
|
|
Bibliography Citation
Cummings, Benjamin F., Michael S. Finke and Russell N. III James. "Bounded Rationality Strikes Again: The Impact of Cognitive Ability and Financial Planners on Roth IRA Adoption and Ownership." Working Paper, Social Science Research Network, March 2013. |