What are the tax benefits of a Roth IRA?

The tax benefits of a Roth IRA primarily revolve around how contributions and withdrawals are taxed. When contributions are made to a Roth IRA, they are after-tax contributions, which means that the money you contribute has already been taxed. The significant advantage here is that qualified withdrawals—those taken during retirement—are entirely tax-free. This allows your investments to grow tax-free over many years, and when you reach retirement age, you can withdraw your funds without having to pay any taxes on the gains or the withdrawals themselves, provided certain conditions are met.

Understanding this feature makes it clear why option B is considered correct: it highlights the unique advantage of tax-free withdrawals in retirement, increasing the overall benefit of saving in a Roth IRA. In contrast, other options do not represent features of a Roth IRA or mischaracterize how it functions. For instance, contributions are not tax-deductible, there are income limits that can restrict contributions at higher earning levels, and while funds can be withdrawn at any time, there may be implications regarding tax and penalties if the withdrawals are not qualified.