Which of the following is a key characteristic of a traditional 401(k) retirement plan?

A) Contributions are made with after-tax dollars.

B) It is typically employer-sponsored and offers tax-deferred growth.

C) Withdrawals in retirement are always tax-free.

D) It has no annual contribution limits.

Explanation

A traditional 401(k) is an employer-sponsored retirement account where contributions are typically pre-tax, allowing the investments to grow tax-deferred until withdrawal in retirement. Option A describes a Roth 401(k) or Roth IRA. Option C is incorrect as traditional 401(k) withdrawals are taxed in retirement. Option D is incorrect as all qualified retirement plans have annual contribution limits set by the IRS.

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