Which account is funded with after-tax dollars and provides tax-free withdrawals in retirement?

• A. Traditional IRA
• B. Pension
• C. Roth IRA
• D. Social Security

Answer: (C)

This is about how the money is taxed over time in retirement accounts. A Roth IRA is funded with after-tax dollars, so you don’t get a tax deduction when you contribute. The big advantage is that both the growth and any withdrawals in retirement are tax-free, as long as you meet the rules for a qualified distribution (generally, you’re at least 59½ and the account has been open for at least five years). This contrasts with a Traditional IRA, where contributions may be deductible up front and withdrawals are taxed as ordinary income, and with pension or Social Security, which are not funded or withdrawn in the same tax-advantaged way.