Making the Most of Your Tax Refund

If you either received or are expecting a tax refund, you may be feeling the temptation to splurge and enjoy the money immediately. After all, you worked hard for that money.
 
While enjoyable, is the splurge you are considering as valuable as investing in your future financial security? While everyone’s needs are different, consider some optional uses of your refund that may work for you:

• Contribute your refund to your employer’s 401(k) plan. If your employer offers a matching contribution, that’s an immediate return on your money in addition to deferring taxes on your contribution. And, funds in the plan grow free of tax until withdrawal.
• Use your refund to pay down credit card balances – you’ll earn a guaranteed double-digit return.
• Consider investing your refund in your child’s education. Both Section 529 college savings plans and education savings accounts offer tax-advantaged ways to save for college costs.
• Take full advantage of your IRA options for retirement savings. Both Traditional and Roth IRAs are great ways to save for retirement.
• If you’ve maximized your retirement and education savings, and your credit cards are under control, put your refund in diversified investments that make sense for your age and financial situation.
• Ask yourself if getting a big refund every year is a smart idea. Would you rather invest your money during the year instead of making an interest-free loan to the government? If so, consider filing an updated Form W-4 with your employer.

Longer term planning generally requires a vision of where you'd like to be in the future? Do you have such a vision? 

If you'd like to review the effect of any of the above choices on your financial situation, please reach out to a trusted financial adviser for additional assistance.

This is general information and should not be acted upon without first determining its application to your specific situation. Please contact us, your CPA or tax adviser for additional details.