Question

Which investment option offers tax-free growth and tax-free distributions, with an annual contribution limit of less than $2,000?

A. Roth IRA.
B. Health Savings Account (HSA).
C. 529 plan.
D. Traditional IRA.

Answer 1

A Roth IRA offers tax-free growth and tax-free distributions, with an annual contribution limit of less than $2,000.

Step-by-step explanation:

The investment option that offers tax-free growth and tax-free distributions, with an annual contribution limit of less than $2,000 is the Roth IRA.

A Roth IRA is a retirement account where contributions are made after taxes, so no taxes are taken out at maturity. This allows for tax-free growth on earnings and tax-free distributions when withdrawn. The annual contribution limit for a Roth IRA is currently $6,000 (or $7,000 for individuals aged 50 or older).