What kind of retirement account allows for after-tax contributions?

A Roth IRA allows for after-tax contributions, which is a defining feature of this type of retirement account. When individuals contribute to a Roth IRA, they use money that has already been taxed, meaning that those contributions do not provide a tax deduction when made. The significant benefit of this account is that qualified withdrawals during retirement, including both contributions and earnings, are tax-free. This can be especially advantageous for those who anticipate being in a higher tax bracket in the future.

In contrast, other options like a Traditional IRA and a 401(k) primarily accept pre-tax contributions, meaning that contributions can reduce taxable income in the year they are made but will be taxed as ordinary income upon withdrawal. A pension plan is generally employer-sponsored and provides a defined benefit, but does not typically involve individual contributions from the employees in the same way a retirement account like a Roth IRA does. Thus, the correct answer clearly reflects the unique tax treatment associated with Roth IRAs, setting it apart from other account types.