What is one of the main limitations of a Roth IRA compared to a Traditional IRA?

The correct choice emphasizes that contributions to a Roth IRA are not tax-deductible, which is a fundamental differentiation from a Traditional IRA. In a Traditional IRA, contributions may be made on a pre-tax basis, allowing individuals to reduce their taxable income in the year of contribution. This tax deduction can be particularly advantageous for individuals who anticipate being in a lower tax bracket during retirement compared to their working years, as withdrawals in retirement are then taxed as ordinary income.

In contrast, Roth IRA contributions are made using after-tax dollars. This means that while you cannot deduct contributions to a Roth IRA from your current taxable income, the benefit lies in tax-free growth and tax-free qualified withdrawals in retirement. This structure appeals to individuals who expect to be in the same or a higher tax bracket in retirement, as their withdrawals will not incur any taxes.

The context of this limitation reflects a broader understanding of how these two types of retirement accounts serve different tax strategies and financial planning goals for individuals.