Registered Tax Return Preparer RTRP Practice Exam

The benefit of a Roth IRA that stands out is the provision for tax-free withdrawals in retirement. This feature allows account holders to withdraw both their contributions and the earnings on those contributions without having to pay any taxes, as long as certain conditions are met, such as reaching the age of 59½ and having had the account for at least five years. This is particularly advantageous for individuals who expect to be in a higher tax bracket in retirement than they are currently, as it provides a way to maximize tax efficiency.

In contrast to the other options, contributions to a Roth IRA are not tax-deductible, which is a key difference when compared to traditional IRAs. Additionally, while traditional IRAs generally have certain income restrictions when it comes to tax-deductibility and contributing, Roth IRAs do have some income limitations that phase out the ability to contribute as one's income increases. Lastly, Roth IRAs have lower contribution limits compared to some types of retirement accounts, including traditional IRAs. All of these factors underscore why tax-free withdrawals in retirement is considered one of the primary benefits of a Roth IRA.