Save Your Tax Refund
If you’re the lucky recipient of a big tax refund, a good way to make the most of it is to save it for retirement. “If you didn’t contribute the maximum amount to your IRA, then funnel your refund into that account,” says Thomas J. Williams, a tax accountant and co-founder of online Deducting the Right Way.
For the 2017 filing season, for example, the average tax refund was $2,782, as per IRS data. If you’re making $50,000 a year, putting away such a refund would be like saving about 6% of your income, said Rosenblum. More than that, if you can contribute to a health savings account, you could also use the refund tax to make your contributions.
“An HSA is one of the most powerful retirement security accounts we have available to use today. Contributions are pre-tax. The account balance grows tax-deferred if you don’t use it for medical expenses. And distributions can be income tax-free if used for qualifying expenses,” says Brent Weiss, CFP and chief evangelist of Facet Wealth in Baltimore.
