Tennessee Insurance Practice Exam 2026 – All-in-One Resource for Exam Success!

The choice of a Traditional IRA is correct because this type of retirement account allows individuals to contribute money on a pre-tax basis. This means that the contributions are deducted from your taxable income, reducing your overall tax burden in the year the contributions are made. Taxes are then paid on the funds only when they are withdrawn during retirement, which often occurs when the individual may be in a lower tax bracket.

In contrast, a Roth IRA is funded with after-tax income, meaning contributions do not reduce taxable income in the year they are made. A Health Savings Account (HSA) also offers tax advantages, but its primary purpose is for medical expenses rather than retirement savings. Lastly, a taxable investment account involves investing money that has already been taxed and does not offer the same tax deferral benefits associated with retirement accounts like the Traditional IRA.