EMS Financial in Fairfax gets a lot of questions about IRAs. After all, there are many different types, and they can be confusing. We’re going to focus on the two most popular: Roth IRAs and Traditional IRAs (or what existed before other IRAs came along). EMS Financial in Fairfax is a certified financial planning firm that specializes in retirement savings plans. IRAs are an integral part of your retirement planning. Contact us today for a free consultation!

WHAT IS A ROTH IRA?

A Roth IRA is an individual retirement account that you fund with money you’ve already paid taxes on. Thus, when you withdraw money, all of that money is tax-free because of this fact. This is one of the main differences between a Roth IRA and a traditional IRA. And because all of the money you put in your Roth IRA is your money, you can withdraw this money at any time, tax-free and penalty-free. This does not include the money you earn on this initial funding.

Hence, Roth IRAs are ideal investments for younger people whose tax bracket will be higher when they retire and who don’t need the upfront tax deduction that the Traditional IRA offers. With no required minimum distributions like Traditional IRAs, Roth IRAs are great ways to build wealth and leave money to your heirs.

WHAT IS A TRADITIONAL IRA?

A Traditional IRA is an individual retirement account that allows for pre-tax contributions with the growth to be tax-deferred, meaning no taxes are paid until the money is taken out. Furthermore, some contributions to a Traditional IRA can be tax-deductible, depending on the taxpayer’s income and other factors, which your retirement planning advisor, EMS Financial in Fairfax, can help you answer since this varies per individual. There are contribution limits, again based on individual circumstances which your financial advisor can help you to understand when you sit down with your retirement planner to decide which IRA is right for you. And since no taxes have been paid on the money in your Traditional IRA, you’ll have to pay taxes once you start withdrawing the funds.

HOW TO CHOOSE BETWEEN THE ROTH IRA AND THE TRADITIONAL IRA

In general, the Roth IRA works for most investors.

  • More flexibility with less penalties for early withdrawals
  • Fewer restrictions with the Roth IRA
  • Easy to pass to heirs
  • More after-tax money in most cases
  • Complements other retirement instruments well

HOW EMS FINANCIAL IN FAIRFAX CAN HELP

EMS Financial in Fairfax offers a variety of financial planning and advice for retirement. We focus on protecting your assets and growing your wealth intelligently, meaning we maximize returns balanced with risk. We help you plan for taxes, as well as for estate planning. In essence, we can help with all investment vehicles, from 529 college savings plans to 401k plans. Our mission is to help you determine your financial goals so we can help you reach them. Retirement is meant to be enjoyed doing the things you want to do. Contact us today for a free consultation!