Final answer:
A. True. The Roth IRA is indeed an after-tax investment that grows tax-free. Contributions are made with after-tax dollars, and the growth on investments and withdrawals are tax-free, provided certain conditions are met, including age and timing of the withdrawal.
Step-by-step explanation:
The statement that a Roth IRA is an after-tax investment that grows tax-free is true. Unlike a traditional IRA, where contributions are made before taxes and taxed upon withdrawal, a Roth IRA is funded with after-tax dollars. This means the contributions have already been subjected to income taxes. However, once in the Roth IRA, the investments grow tax-free, and when you withdraw the funds at retirement age, you owe no tax at all on your earnings as long as certain conditions are met. Additionally, Roth IRAs have no required minimum distributions during the owner's lifetime, giving the investments the potential to continue growing tax-free throughout the owner’s life. There are maximum contributions that you can make to a Roth IRA each year, which have been set at $5,500 for 2014 and 2015, with a $1,000 catch-up contribution allowed for those age 50 or older.