What type of account allows you to pay taxes on money when it is put into the account?

A Roth IRA allows you to pay taxes on money when it is deposited into the account, which means contributions to a Roth IRA are made after taxes have already been paid. This unique characteristic provides significant tax benefits upon withdrawal, as qualified distributions, typically taken after reaching retirement age, are tax-free. This allows individuals to grow their investments without incurring additional taxes during retirement, which can be an attractive feature for many savers.

In contrast, a Traditional IRA allows contributions to be made pre-tax, meaning taxes are paid only upon withdrawal, which can lead to a higher tax burden during retirement if income places you in a higher tax bracket. The Thrift Savings Plan is primarily designed for federal employees and offers tax-deferred savings, similar to a Traditional IRA, while Lifecycle Funds are investment options that automatically adjust the asset allocation as the target date approaches, but they do not inherently address tax implications in the same way an account type like a Roth IRA does.