Trading, Accounts & Prohibited ActsQuestion 242 of 398
Which statement best describes the tax treatment of a traditional IRA?
a.Contributions are made with after-tax dollars and all withdrawals are tax-free
b.Contributions may be tax-deductible and earnings grow tax-deferred until withdrawal
c.Contributions and withdrawals are both fully taxable
d.There are no taxes at any stage
Explanation
Traditional IRA contributions may be deductible depending on income and workplace plan coverage, and earnings grow tax-deferred. Withdrawals in retirement are taxed as ordinary income, and required minimum distributions eventually apply.
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