Certified Senior Advisor (CSA) Practice Test

The investment option that allows individuals to accumulate money on a tax-deferred basis until retirement is the Traditional IRA. Contributions made to a Traditional IRA can often be deducted from taxable income, effectively reducing the tax burden in the year the contributions are made. As the investments within the account grow over time, this growth is not subject to taxes until distributions are taken in retirement, which is when individuals often find themselves in a lower tax bracket.

This structure allows for the compounding of investments without the immediate tax impact, making it a strategic choice for long-term saving for retirement. In contrast, other options like a Roth IRA involve contributions made with after-tax dollars, where earnings grow tax-free but not tax-deferred. A Health Savings Account (HSA) serves a different purpose focused on health-related expenses, and a taxable brokerage account does not provide the same tax advantages, as capital gains and dividends are taxed in the year they are realized.