Which retirement plan allows contributions pretax, reducing taxable income?

The choice of a Traditional IRA is correct because contributions made to this type of retirement account are typically tax-deductible, allowing individuals to contribute income before taxes are taken out, thereby reducing their taxable income for that year. This feature is particularly beneficial for individuals looking to lower their taxable income in the present while saving for retirement.

With a Traditional IRA, the taxes on contributions are deferred until withdrawals are made during retirement, at which point individuals may be in a lower tax bracket, providing an additional tax advantage. This contrasts with options like a Roth IRA, where contributions are made with after-tax dollars and withdrawals are tax-free in retirement, but do not reduce current taxable income.

A Health Savings Account (HSA) does allow for pretax contributions, but it is specifically meant for medical expenses rather than retirement savings. A Brokerage Account does not provide any tax advantages regarding contributions, as it involves after-tax income and is subject to capital gains tax on earnings. Thus, the Traditional IRA stands out for its ability to lower taxable income directly with contributions.