Which retirement account allows tax-free growth using after-tax dollars?

• A. Traditional IRA
• B. Savings Plan
• C. Roth IRA
• D. 401(k) with pretax contributions

Answer: (C)

Roth IRAs are designed for tax-free growth using after-tax dollars. When you contribute to a Roth IRA, you use money that has already been taxed, so you don’t get a tax deduction now. The investments inside the Roth grow without owing taxes on the earnings, and qualified withdrawals in retirement are tax-free, including the earnings. This is different from traditional retirement accounts, where contributions are often tax-deductible today but you pay taxes on withdrawals later, so the growth is tax-deferred rather than tax-free. A 401(k) with pretax contributions works the same way, and a generic Savings Plan doesn’t guarantee tax-free growth on investments. So the Roth IRA best fits the description.