Which statement accurately describes a Roth IRA?

A Roth IRA is a type of retirement account that allows individuals to contribute after-tax income, meaning that taxes are paid on contributions upfront rather than at withdrawal. The distinguishing feature of a Roth IRA is that it offers tax-free growth and the potential for tax-free withdrawals during retirement if specific conditions are met, such as the account being held for at least five years and the account holder being at least 59½ years old at the time of withdrawal. This characteristic makes it particularly appealing for individuals looking for tax-efficient retirement savings.

The other options do not accurately reflect the characteristics of a Roth IRA. For instance, unlike traditional IRAs, Roth IRAs do not have required minimum distributions (RMDs) during the account holder's lifetime, which means individuals can leave their money in the account to grow for as long as they choose. This flexibility allows for continued tax-free growth. Similarly, there is no restriction on making contributions based solely on age as long as the individual has earned income and meets the income eligibility requirements. Finally, the maximum contribution limit for a Roth IRA is not $10,000; it is subject to annual limits set by the IRS, which are lower than that figure and may change depending on the individual's age and income.