A retirement plan is an arrangement of financing an individual’s income post his retirement. These plans can be set by the employers, insurance companies, trade unions, government, or any other organization. Tax benefits are provided on investments made on some retirement plans based on provisions of the Internal Revenue Code (IRC) and regulated by the labor department under the ERISA Act. The retirement plans can be classified as defined benefit plans and defined contribution plans based on the types of payment, investment, and benefits payout method preferred.
What is a defined contribution plan?
An individual chooses the type of investment towards which a portion of the earnings are allocated toward retirement. One might choose either a mutual fund, stocks, or other securities. IRA, 401(k), profit sharing plans, etc. are some examples of a defined contribution plan. These are eligible for tax benefits provided they are not withdrawn before the age of 59.5 or a penalty will be levied on early withdrawal.
What is an IRA?
An Individual Retirement Account (IRA) is a retirement plan that allows the employees to have control over their savings for retirement within an account that will be eligible for tax benefits. IRAs are classified into various types.
Types of IRAs:
Traditional IRAs: The contributions may be tax deductible and the earnings are allowed to grow on tax-deferral. This allows the individual to defer paying taxes until retirement. This gives flexibility to withdraw at a lower tax bracket, depending on the income and the tax rates that apply. These plans are subjected to rules on distribution, investment, and contribution.
Advantage: The tax on the earnings can be deferred until the individual chooses to withdraw.
Disadvantage: There are mandatory withdrawals set for 70.5 years of age.
Roth IRAs: It is a savings account to which individuals can make contributions after the tax on income is paid. Distributions from this IRA may be tax-free if some criteria are met. It supplements an individuals’ retirement plan well. It accumulates earnings on a tax-deferred basis and can be made tax free if certain requirements are met.
Advantage: Contributions are discretionary, and hence the individuals can choose to fund the Roth IRAs whenever they want.
Disadvantage: The contributions are not eligible for tax-deductions and only the qualified distributions are tax free.
SEP IRAs: SEP stands for Simplified Employee Pension which is a plan established by the employer where contributions are made on behalf of individual employees. Here, the tax benefits are on the contributions made by the employer and then may be given to individuals on a discretion.
Advantage: Employee doesn’t have to pay any tax on the contributions.
Disadvantage: Any earnings or distributions made on this plan are taxable to an employee and also requires for a traditional IRA to be set-up individually which is then linked to this plan making the entire process very cumbersome.
Simple IRAs: This is a salary reduction plan which is established by the employer or self-employed persons. Here, the employees contribute a part of their pretax income/salary to this plan which defers the tax on the money until it is distributed.
Advantage: Starting and maintaining of a simple IRA is less expensive as the funding is shared between the employer and the employee.
Disadvantage: Contributions are not taxed but the distributions are taxable.
There are companies that work on collecting and maintaining credit information of consumers. These are known as credit reporting agencies (CRAs). There are three such major CRAs in the country, namely Equifax, Experian, and TransUnion. Apart from these, there are other smaller-scale agencies too that specialize at the job. If you’re worried about “where to get my credit score?,” the larger CRAs are the most reliable bets.
These major CRAs obtain information from companies that you hold business and transactions with. People or companies that lend you money regularly report to these CRAs on your repaying status. There is also detailed information on the amount you are indebted and whether you have ever defaulted on your payments. Aside from the reports obtained from lenders, these companies also tally your general records based on certain other aspects. Some of these aspects are your public records from the local and state judiciary. These include your tax records and bankruptcy information. This information makes up an important chunk of your credit score and its report.
Equifax
Present in 24 countries, Equifax is an agency that offers consumers protection against identity theft and credit fraudulence. They also sell credit reports and credit monitoring assistance to businesses.
Experian
Experian started off in London and is now a trusted agency in 39 different countries. It provides you with a credit score, credit report, and even credit tracker on subscription. The agency uses FICO 8 system of credit score calculation. Experian was a part of Forbes’ “World’s Most Innovative Companies” in 2018.
TransUnion
Based across 30 countries with a database of over 1 billion consumers, TransUnion is another CRA giant. The agency, like the other ones, will provide you with your credit score and your credit reports. In case you decide to freeze your TransUnion credit report, it will also go the extra mile to notify Equifax and Experian, which frankly is a big help especially in case of identity theft and credit fraud.
So, the next time you are sat wondering “where to get my credit score?,” think of these three giants that provide you with an annual credit score and credit report for free once each year. However, if you are looking for more frequent updates, you can subscribe to their services and receive your monthly updates.
Did you know that you have more than a single credit score? Agencies calculate your credit score based on the data in your credit reports. If you are wondering, “where to get my credit score?,” there are three main credit reporting agencies. These can have different credit scores for you if your information on each of their credit reports is different. Also, these agencies charge a fee to reveal your credit score.
Recently, it has become easier to track and get hold of your credit score without paying any fees. You can get it from your credit card company, your loan provider, and even from a non-profit counselor. Here are a few tips you can use to check your score.