What type of account allows for tax-free growth until funds are withdrawn?

The type of account that allows for tax-free growth until funds are withdrawn is a tax-deferred IRA account. This account type, specifically traditional IRAs, permits individuals to contribute pre-tax income, which means that the investments within the account can grow without being subject to taxes during the accumulation phase. Taxes are only assessed when funds are withdrawn, typically in retirement when the individual might be in a lower tax bracket.

The key feature of tax-deferred accounts is this growth without immediate tax implications, making them particularly effective for long-term savings strategies. As individuals approach retirement, they can take advantage of this tax-deferral benefit, potentially maximizing their investment returns over time.

Taxable accounts, health savings accounts, and regular brokerage accounts each come with different tax implications, meaning they don't provide the same tax advantages during the growth period as a tax-deferred IRA does. Taxable accounts incur taxes on any gains or income in the year they are realized, while health savings accounts are designed for specific healthcare expenses and can have different tax treatments. Regular brokerage accounts also face taxation on capital gains and dividends as they occur, thereby not allowing for tax-free growth in the way that a tax-deferred IRA can.