Roth IRAs are like Mountain Dew, while traditional IRAs are like Pepsi.
Research from the Washington-based Investment Company Institute shows that Roth IRA investors tend to be younger than traditional IRA investors, leading to significant differences in how the accounts are being used.
At the end of 2014, 31 percent of Roth investors were younger than 40, compared with 15 percent of traditional IRA investors. Around one quarter, 24 percent, of Roth IRA investors were 60 or older, compared with 39 percent of traditional IRA investors.
According to the ICI, the age discrepancy is from the limits on contributions to Roth IRAs and the prior limitations on conversions and rollovers into Roths, which have been eased in recent years.
Traditional IRAs tend to be opened with rollovers, while Roth IRAs tend to be opened with direct contributions.
Most of the traditional IRAs opened in 2014, 85 percent, were opened with rollovers alone, and nearly half of traditional IRA owners at the end of 2014 had rollovers in their traditional IRAs.
By contrast, only around one in 15 Roth IRA investors had rollovers in their Roth accounts at the end of 2014, and three-quarters of new Roth IRAs in 2014 were opened only through contributions.
Roth IRAs tend to have lower withdrawal activity, higher equity holdings and younger investors than traditional IRAs.
Since Roth accounts do not mandate that investors take required minimum distributions after reaching a certain age, the ICI says it is unsurprising that they have lower levels of withdrawals. In 2014, 4 percent of Roth IRA investors made withdrawals, compared with 23 percent of traditional IRA investors.
At year-end 2014, nearly 80 percent of Roth IRA assets were invested in equity holdings compared with less than two-thirds of traditional IRA assets.
All told, 66 percent of Roth IRA assets were invested in stocks or stock funds, compared with 55 percent of traditional IRA assets.