Which of the following types of IRAs allows tax-free growth on earnings?

A Roth IRA is the type of Individual Retirement Account that allows for tax-free growth on earnings. This means that any money that grows in the account, including interest, dividends, and capital gains, is not subject to taxation as long as certain conditions are met, such as the money being withdrawn after the account holder reaches the age of 59½ and having the account open for at least five years.

One of the distinct features of a Roth IRA is that contributions are made with after-tax dollars, which contrasts with other types of IRAs where contributions may be tax-deductible. This unique tax treatment can be particularly advantageous for individuals who anticipate being in a higher tax bracket during retirement compared to when they made the contributions.

Other types of IRAs, such as Traditional IRAs, allow for tax-deferred growth where taxes are paid upon withdrawal, and thus do not provide the same tax-free growth benefit during the accumulation phase. Spousal IRAs are simply Traditional or Roth IRAs set up for a non-working spouse and do not have a separate tax treatment. A Simple IRA is another employer-sponsored plan that offers tax-deferred growth similar to Traditional IRAs but is usually designed for small businesses.