What type of contributions are tax deferred, allowing growth without immediate taxation?

The correct choice is Traditional IRA. Contributions to a Traditional IRA are made with pre-tax dollars, meaning you do not pay income tax on the money you contribute in the year of the contribution. Instead, those funds can grow tax-deferred, allowing the investment to increase in value without attracting immediate tax implications. Taxes are then paid upon withdrawal during retirement, which often results in a lower tax rate for many individuals.

In contrast, a Roth IRA requires contributions to be made with after-tax dollars, which means you pay taxes upfront but can withdraw funds tax-free in retirement. A SEP IRA is similar to a Traditional IRA in that it allows tax-deferred contributions, but it is specifically designed for self-employed individuals and small business owners. A 401(k) also allows for tax-deferred contributions, yet it is typically offered by employers and may include additional features like matching contributions. Each option serves different financial strategies and goals, but for the specific question focusing on tax-deferred contributions, the Traditional IRA is the most fitting answer.