6
QuizMultiple Choice

Planning and Paying for College — Quiz

Question 6 • Personal Finance

What is a key difference between a Roth IRA and a Traditional IRA?

Answer
A
Traditional IRAs eliminate taxes.
B
Roth IRAs are tax-free later, Traditional IRAs are taxed later.
C
Roth IRAs are loans, Traditional IRAs are savings.
D
Roth IRAs require repayment.

Explanation

A Roth IRA is generally funded with money that has already been taxed, so qualified withdrawals later are tax-free. Traditional IRA contributions may receive tax benefits up front, but withdrawals are generally taxed later. Therefore, choice B correctly describes the key difference.

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