Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
They are brimming with high costs, conflicts of interest, and poor investment choices. The primary beneficiaries of these plans are mutual funds and plan advisers who skim off billions in fees-money that should be going into the accounts of plan participants.
The allure of these plans is the corporate match. It’s tough to argue against that benefit, no matter how deficient your plan may be. If your employer will match your contribution, you should seriously consider investing the minimum necessary to obtain the maximum match.
What if your employer doesn’t match your 401(k) contribution? Here are three things you can do to create your own best retirement plan.
# 1: Invest in a Roth IRA
I am a big fan of the Roth IRA. Unfortunately, not everyone qualifies for it.
The primary restriction is income. Income limitations are based on your modified adjusted gross income, which you can find on your IRS Form 1040. Or download IRS Publication 590, Individual Retirement Arrangements.
For 2010, if you are single, head of household, or married filing separately and did not live with your spouse during the tax year, your maximum income cannot exceed $120,000. If you are married and filed jointly, your maximum income cannot exceed $176,000.
There are other restrictions, but the income limitation is the big one. If you do qualify, the contribution limits are the same as for the traditional IRA. You may contribute up to $5,000 (or up to $6,000 if you are at least fifty years of age).
Better yet, if you qualify for a Roth IRA, your spouse may open up a spousal Roth IRA and contribute the same amount, even if he or she doesn’t work.
The big benefit of the Roth IRA is that you make contributions with already-taxed income, but you won’t pay any taxes upon withdrawing up to the amount contributed. And there’s no tax on investment earnings within the Roth once you reach age 59 1/2, as long as the plan has been in existence for at least five years. You also won’t have to take required minimum distributions at age 70 1/2. And there are some great features for passing down a Roth IRA to your heirs.
If you don’t need the immediate tax break, you should seriously consider a Roth IRA. The tax deductions offered by a traditional IRA (see below) are more than offset by the overall benefits of the Roth.
# 2: Invest in a Traditional IRA
A traditional individual retirement account permits you to make tax-deductible contributions up to $5,000 ($6,000 if you will be fifty or older by the end of the year).
A traditional IRA gives you many of the benefits of a 401(k) plan, without the burdens. Here’s why it may be right for you:
While this sounds pretty good, there are some downsides to traditional IRAs:
Traditional IRAs are still worthy of consideration, especially if you don’t qualify for a Roth IRA.
# 3: Create an after-tax account
When you invest in a 401(k) plan, or a traditional IRA, you are counting on the benefit of tax deferral. You could win the bet if tax rates stay the same or go down. But what if they go up? You are going to take a big tax hit on all the money withdrawn, based on your marginal tax rate on the date of withdrawal.
If you invest in an after-tax account, you don’t get the benefit of a tax deduction, or tax deferral. But if you stay invested for a year and a day, the gain on your investment will be taxed upon withdrawal at the historically much lower capital gains rate.
An after-tax account also gives you more flexibility, since there’s no penalty for early withdrawal and no required minimum distribution at age 70 1/2.
Many investors assume a tax-deferred account is beneficial to them. The reality is that an after-tax account can be just as good-or better.
Creating your own best retirement plan means figuring out what your options are and thinking about how you’re going to salt away the savings. The savviest investors will take advantage of every opportunity to put away as much as they can.
Which type of retirement account are you using?
Dan Solin is a best-selling author, a wealth advisor with Buckingham, and the director of investor advocacy for the BAM Alliance.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.