What is an example of a feature that distinguishes a traditional IRA from a Roth IRA?

The distinguishing feature that sets a traditional IRA apart from a Roth IRA is that contributions to a traditional IRA are made with pre-tax income. This means that when you contribute to a traditional IRA, you may be able to deduct the amount of your contribution from your taxable income in the year you make the contribution, potentially lowering your overall tax bill. The money in a traditional IRA grows tax-deferred, and you pay taxes on withdrawals during retirement when you typically may be in a lower tax bracket.

In contrast, Roth IRA contributions are made with after-tax income, which means you do not receive an upfront tax deduction for contributions, but qualified withdrawals made during retirement are tax-free. This fundamental difference in taxation at the time of contribution is a key feature that helps distinguish between the two types of IRAs.

The other choices do not accurately capture this aspect. While tax-free withdrawals in retirement are a feature of a Roth IRA, they are not characteristic of a traditional IRA. Similarly, there are annual contribution limits imposed on both types of accounts, so the assertion of unlimited contributions is incorrect. Lastly, while both traditional and Roth IRAs have rules regarding mandatory distributions, it is important to note that traditional IRAs require minimum distributions starting at age 72, while Roth