In retirement accounts, what are capital gains?

Capital gains refer to the profits made from the sale of investments, which is why the choice indicating profits from the sale of investments is correct. When an individual sells an asset, such as stocks or mutual funds, for a higher price than they originally paid, the difference in price is the capital gain. This is particularly relevant in retirement accounts, where investments may appreciate over time, leading to increased value that can be realized upon selling those investments.

Understanding capital gains is crucial for retirement planning, as these gains can significantly affect the overall growth of retirement savings. While some options may represent important elements of retirement accounts—such as losses, taxes, or employee contributions—capital gains specifically denote a positive return on investment that enhances the value of the account and contributes to long-term financial goals.