Which of these statements concerning Traditional IRAs is CORRECT?

Which of these statements concerning Traditional IRAs is CORRECT?

A ) Earnings are not taxable when withdrawn

B) Earnings are taxable when withdrawn

C) Contributions are never tax-deductible

D) Contributions are always made by the employer

Ans. B) Earnings are taxable when withdrawn

Often the Traditional IRAs(Individual Retirement Accounts) contributions are made prior tax and hence, individuals are able to deduct them from the taxable income for that year. On the contrary, the profits on which the account is based grow tax-deferred and it is only when an withdraw is made that tax is paid on the earnings. With respect to the Traditional IRA, in the time of retirement while the funds are withdrawn, both the original contribution and the accumulated earning tax will be imposed at ordinary income tax rates. Contrary to the Roth Individual Retirement Accounts, wherein contributions are taxed after the taxpayer has already been taxed, withdrawals that qualify for retirement are 100% free from taxation in this case.