Final answer:
The claim regarding traditional IRAs is false; contributions can be deductible, and distributions are generally taxable. Traditional IRAs allow tax-deferred growth, and Roth IRAs provide tax-free withdrawals in retirement.
Step-by-step explanation:
The statement 'When contributions are made to a traditional IRA, they are not deductible by the participant. Later distributions from the IRA, however, are not taxed.' is false. Contributions to a traditional IRA can indeed be tax-deductible depending on the taxpayer's income, filing status, and coverage by an employer-sponsored retirement plan. However, when distributions are taken after retirement, that money is subject to income tax. The traditional IRA allows individuals to contribute pretax income within certain limits, and the account grows tax-deferred, meaning that no capital gains or dividend income is taxed until withdrawal.
Unlike a traditional IRA, a Roth IRA involves contributions made with after-tax dollars, and thus, the withdrawals upon retirement are generally tax-free. Both traditional IRAs and Roth IRAs are designed to encourage long-term savings for retirement, allowing for a potentially higher rate of return on savings due to their tax-advantaged status.It's important to note tax laws change over time, so it's crucial for savers to stay informed about the current rules and contribution limits, which may have changed since the contribution limits mentioned for the years 2014 and 2015.When contributions are made to a traditional IRA, they are not deductible by the participant. However, the distributions from the IRA are taxed.A traditional IRA is a type of individual retirement account where individuals can deposit pretax income to invest and grow tax-deferred. The tax is paid when the money is withdrawn.