Which statement correctly describes the tax treatment of a Roth IRA?

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Multiple Choice

Which statement correctly describes the tax treatment of a Roth IRA?

Explanation:
Roth IRAs are funded with after‑tax dollars, so you don’t get a deduction now. The money grows tax‑free, and qualified withdrawals in retirement are tax‑free as well. That’s why the correct description is that contributions are not deductible and withdrawals are tax-free, provided you meet the rules for a qualified distribution. This contrasts with traditional IRAs, where you may get a deduction now and pay taxes on withdrawals later. Some other statements mix up the timing or amount of tax, which doesn’t fit how Roths work.

Roth IRAs are funded with after‑tax dollars, so you don’t get a deduction now. The money grows tax‑free, and qualified withdrawals in retirement are tax‑free as well. That’s why the correct description is that contributions are not deductible and withdrawals are tax-free, provided you meet the rules for a qualified distribution. This contrasts with traditional IRAs, where you may get a deduction now and pay taxes on withdrawals later. Some other statements mix up the timing or amount of tax, which doesn’t fit how Roths work.

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