Description of image

Question 9

Tax-advantaged accounts are a key tool for investors. Two of the most common are a Traditional (pre-tax) retirement account and a Roth (after-tax) account. The core difference: Traditional contributions are often tax-deductible up front and withdrawals are taxed in retirement; Roth contributions are made with after-tax dollars but qualified withdrawals (earnings + contributions) are tax-free in retirement. Which is better depends on expected future tax rates, current income, and other factors -- younger savers who expect to be in a higher tax bracket later often favor Roth accounts, while those seeking current-year tax reductions may prefer Traditional accounts. This question asks you to pick the accurate tax treatment difference.

Which statement correctly contrasts Roth and Traditional retirement accounts?

Did You Also Know...

By Wise Wallet

Market crashes happen periodically and recoveries can take years, which is why emergency funds and long time horizons matter.