What type of account allows individuals to accumulate tax-deferred income based on their tax bracket?

The correct choice, which is the Traditional IRA, serves as a tool for individuals to accumulate retirement savings while benefiting from tax-deferred income. This means that the money contributed to the account can be deducted from taxable income, allowing the individual to potentially lower their tax bill in the year contributions are made. The earnings on the investments within the Traditional IRA also grow tax-deferred, meaning taxes are postponed until withdrawals are made during retirement, when the individual may be in a lower tax bracket.

This feature makes the Traditional IRA particularly valuable for individuals who are currently in a higher tax bracket than they expect to be in later years. By contributing to a Traditional IRA, they can take advantage of the tax deduction now while planning for a future where they will face a lower tax burden upon withdrawal.

In contrast, a Roth IRA allows contributions to be made with after-tax dollars, meaning there is no tax deduction at the outset; however, qualified withdrawals in retirement are tax-free. Health Savings Accounts (HSAs) are primarily focused on medical expenses rather than retirement income and have different tax advantages related to healthcare costs. Coverdell Education Savings Accounts are designed for educational expenses and do not focus on retirement savings. Thus, they do not accumulate income in the same way a