PSI Life Exam Practice Test

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Prepare for the PSI Life Exam. Utilize flashcards and multiple-choice questions with detailed hints and explanations. Ensure success on your exam!

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Are contributions made to a Roth IRA tax deductible?

Yes, fully deductible
No, not tax deductible
Partially deductible
Deductible only for certain income brackets

The correct answer is: No, not tax deductible

Contributions made to a Roth IRA are not tax deductible. This is a key feature of Roth IRAs. Instead of receiving a tax deduction when contributions are made, the benefit of a Roth IRA comes when withdrawals are made in retirement. Qualified distributions from a Roth IRA are tax-free, providing a significant advantage for individuals who anticipate being in a higher tax bracket during retirement or for those who simply want tax-free growth on their investments. Unlike traditional IRAs, where contributions may be tax-deductible, Roth IRAs require contributions to be made with after-tax dollars. This structure allows for tax-free growth and tax-free withdrawals, provided certain conditions are met, such as being over 59½ and having the account open for at least five years. The lack of a tax deduction at the time of contribution is a distinguishing characteristic of Roth IRAs compared to other retirement accounts.