Question
A retirement account in which investments are not tax-deferred but can be withdrawn tax-free is called a A. 401(k) B. Roth IRA O C. SEP IRA O D. traditional IRA
Answer
A Roth IRA, which is funded with post-tax dollars but withdrawals are tax-free.
- A:There are several types of retirement accounts. Do you know which types you would like me to compare?
- Q: What is the difference between each type of retirement account in terms of tax benefits? A: A 401(k) and traditional IRA are tax-deferred, meaning that contributions are made pre-tax and are taxed upon withdrawal. A Roth IRA is funded with post-tax dollars but withdrawals are tax-free, and a SEP IRA is also tax-deferred but geared toward self-employed individuals.