Which tax benefit is associated with tax-deferred growth investments?

The tax benefit associated with tax-deferred growth investments is that taxes are paid when funds are withdrawn. This means that the investment can grow without being subject to annual taxation on the earnings, allowing for potentially greater growth over time due to the compounding effect. This feature is especially beneficial in retirement accounts, such as traditional IRAs and 401(k) plans, where individuals can defer taxes until they reach withdrawal age, typically during retirement when they may be in a lower tax bracket.

This structure enables investors to reinvest the full amount of their earnings without deductions for tax payments, which can significantly enhance the growth potential of the investment. Once the funds are eventually withdrawn, they are taxed as ordinary income, reflecting the individual's tax rate at that time.

In contrast, the other options do not accurately describe tax-deferred accounts. Some require taxes to be paid upfront, some suggest no tax liability ever, and others imply annual tax obligations, which do not capture the essence of tax-deferred growth investments.