Final answer:
Roth IRA investors can perform early withdrawals of contributions without penalties under certain conditions, which is true. Traditional IRAs are taxed upon withdrawal as they are tax deferred. Both accounts have annual contribution limits and provide tax advantages to encourage retirement savings.
Step-by-step explanation:
Roth IRA investors may perform early withdrawal of contributions without paying penalties. This is true in certain circumstances. Roth IRAs allow for tax-free growth, and individuals owe no tax on earnings as they accumulate or when they withdraw, provided certain conditions are met.
Conversely, Traditional IRAs have different rules. With a traditional IRA, individuals face taxes on the lump sum they withdraw during retirement, since this account is tax deferred. Contributions are made with pretax income and taxes are not paid until money is withdrawn after retirement. Both types of accounts have a maximum contribution limit per year, and these limits can vary.