Taxpayers contributing to and receiving distributions from a Roth IRA generally earn a before-tax rate of return on their contributions equal to their after-tax rate of return.

Question

Quizplus · Accepted Answer

This is because contributions to a Roth IRA are made with after-tax dollars, meaning that the contributions themselves are not tax-deductible. Therefore, the earnings on those contributions are not subject to income tax when distributed, resulting in an after-tax rate of return equal to the before-tax rate of return.

Taxpayers Contributing to and Receiving Distributions from a Roth IRA