What type of income does a Roth IRA allow individuals to invest?

A Roth IRA permits individuals to invest using post-tax income, which allows for tax-free growth on investments within the account. This means that the money contributed to a Roth IRA has already been taxed, and as it grows over time, that growth is not subject to taxation when withdrawn in retirement, provided certain conditions are met. This feature makes Roth IRAs particularly attractive for long-term investors who anticipate being in a higher tax bracket in retirement or who seek to minimize their tax liabilities during their retirement years.

Investing post-tax income allows individuals to maximize their future tax-free withdrawals, essentially taking advantage of the compound growth without the burden of future tax obligations on the earnings. The tax-free nature of withdrawals, especially of the earnings, is one of the primary benefits of a Roth IRA, distinguishing it from other retirement accounts, such as Traditional IRAs, where taxes are owed upon withdrawal.

The other options present limitations or incorrect areas of focus regarding the nature of contributions to a Roth IRA. For instance, only pre-tax income is relevant in the context of Traditional IRAs, while Roth IRAs allow contributions not only from earned income but also from other sources as long as they meet the income criteria. Thus, option B accurately encapsulates the fundamental benefits of a