Question

what type of a retirement account is a roth ira?
a traditional individual account which allows individuals to direct pretax income towards investments that can grow tax - deferred; you are taxed on the money when you pull the money out when youre older.
an individual retirement account allowing a person to set aside income (that you have paid taxes on first) up to a specified amount each year and invested.
an employer - sponsored retirement plan funded with after - tax money that you can withdraw tax - free once you reach retirement age
qualified employer - established plan to which eligible employees may make salary deferral (salary reduction) contributions on a post - tax and/or pretax basis.

Explanation:

To determine the correct answer, we analyze the characteristics of a Roth IRA:

• A Roth IRA is an individual retirement account (not employer - sponsored) where contributions are made with after - tax (already taxed) income, and qualified withdrawals are tax - free.
• Option 1 describes a Traditional IRA (pretax contributions, taxed on withdrawal).
• Option 2: "An individual retirement account allowing a person to set aside income (that you have paid taxes on first) up to a specified amount each year and invested" matches the Roth IRA's feature of using after - tax (already paid taxes on) income for contributions.
• Option 3 is incorrect as Roth IRA is not employer - sponsored.
• Option 4 describes a 401(k) - type plan (employer - established, salary deferral contributions), not a Roth IRA.

Answer:

B. An individual retirement account allowing a person to set aside income (that you have paid taxes on first) up to a specified amount each year and invested.