What feature distinguishes a Roth IRA from other retirement accounts?

A Roth IRA is distinguished from other retirement accounts primarily by the feature that allows earnings within the account to grow tax-free. This means that once you contribute to a Roth IRA, any investment growth or earnings on those contributions will not be subject to federal income tax, provided certain conditions are met, particularly regarding the timing of withdrawals.

This allows individuals to potentially benefit from greater longer-term growth since they do not have to pay taxes on their earnings when they are withdrawn during retirement. In contrast, traditional retirement accounts often require that you pay taxes on both contributions (if not tax-deductible) and any earnings when you take distributions in retirement. Therefore, the tax-free growth of earnings in a Roth IRA is a significant incentive for many savers, as it can maximize retirement funds.

The other options do not accurately represent the defining characteristics of a Roth IRA. For instance, contributions to a Roth IRA are made with after-tax dollars, which is contrary to the notion of tax-deductible contributions. Furthermore, while traditional IRAs may require mandatory withdrawals (known as required minimum distributions) starting at age 72, Roth IRAs do not enforce such mandatory withdrawals during the owner's lifetime, offering more flexibility in how and when funds are accessed.