Which of the following statements about the money invested in a traditional IRA account
is correct?
A. It isn’t taxed until it’s withdrawn.
B. It’s subject to double taxation.
C. It’s taxed as you make deposits.
D. It isn’t taxed.
I'll be glad to check your answer.
The answer is d
To determine which statement is correct about the money invested in a traditional IRA account, let's evaluate the options:
A. It isn't taxed until it's withdrawn: This statement is correct. With a traditional IRA, the contributions you make are made with pre-tax dollars, meaning they are not taxed when you contribute to the account. The earnings on the investments within the IRA are also tax-deferred, so they are not taxed until you withdraw the money during retirement.
B. It's subject to double taxation: This statement is incorrect. The money in a traditional IRA is only taxed once, either when you contribute to the account or when you withdraw the money in retirement, but not both.
C. It's taxed as you make deposits: This statement is incorrect. Contributions to a traditional IRA are made with pre-tax dollars, so they are not taxed at the time of deposit.
D. It isn't taxed: This statement is incorrect. While the funds in a traditional IRA grow tax-deferred, they are eventually subject to taxation when you withdraw the money in retirement. Withdrawals from a traditional IRA are generally taxed as ordinary income.
Therefore, the correct statement is A. It isn't taxed until it's withdrawn.