CARD Q063
Which feature most clearly distinguishes a Roth IRA from a traditional IRA?
- Qualified Roth distributions are tax-free; Roth contributions are not deductible
- Both accounts always permit deductible contributions
- Traditional IRA distributions become tax-free solely upon retirement
- Roth contributions are deductible and qualified distributions are taxable
Qualified Roth distributions are tax-free; Roth contributions are not deductible
Traditional IRA contributions may be deductible subject to rules. Roth accounts trade a current deduction for tax-free qualified distributions.
Why each choice is right or wrong
A. Qualified Roth distributions are tax-free; Roth contributions are not deductible
Correct. Traditional IRA contributions may be deductible subject to rules. Roth accounts trade a current deduction for tax-free qualified distributions.
B. Both accounts always permit deductible contributions
Incorrect. Roth contributions are not deductible, and traditional deductions are conditional.
C. Traditional IRA distributions become tax-free solely upon retirement
Incorrect. Retirement alone does not make traditional IRA distributions tax-free.
D. Roth contributions are deductible and qualified distributions are taxable
Incorrect. This reverses the normal Roth contribution and qualified-distribution treatment.
Review the related terms
Use these lessons to revisit the concepts and try additional practice questions.