Taxpayers often have to decide between contributing to a traditional deductible IRA or a Roth IRA.In making the comparison between the two IRAs,which models should the taxpayer use?

Question

Quizplus · Accepted Answer

D) The Pension Model is appropriate for the traditional deductible IRA because before-tax funds are invested, earnings compound without tax, and the full withdrawal is taxable at distribution. The Exempt Model applies to the Roth IRA because after-tax funds are invested, and earnings are exempt from taxable income while compounding and at distribution.

Taxpayers Often Have to Decide Between Contributing to a Traditional