5 Ways to Make the Most of Your Tax Refund

18dd5d65b13f04a72719_TAXPIC.jpg
Credits: wfp
18dd5d65b13f04a72719_TAXPIC.jpg

More than 110 million Americans collected a tax refund – worth an average of just under $3,000 – after filing their 2015 tax returns, according to statistics released by the Internal Revenue Service (IRS). If you’re one of the many Americans who expect to receive a financial windfall this year, what do you plan to do with the money? It’s tempting to treat yourself to a new TV or a pricey vacation. However, if you refrain from spending your refund impulsively, the money presents an opportunity to treat yourself to additional financial security. Here are five ways to extend the benefits of any refund you receive this year or in the future:

1. Give your retirement savings a boost

While your refund may not seem like a large sum compared to the amount you need to live the life you want in retirement, every dollar you put aside matters. Keep in mind that the money will have a chance to grow, particularly if you are several years or even decades from retirement.

Sign Up for E-News

This year, think about using your refund to “max out” your contributions to an Individual Retirement Account (IRA). Individuals age 50 or older can set aside $6,500 per year in an IRA while those under 50 can save up to $5,500 annually. You may be able to deduct your IRA contributions if you qualify, which may help reduce your 2017 tax bill. You can also put your refund to work in a Roth IRA, potentially qualifying you for tax-free withdrawals in retirement.

2. Save for another long-term goal

If you are saving money for a down payment on a home, a home improvement, or higher education needs, your refund can make a big difference. Consider using your tax refund to establish a separate savings account, or invest the money in its own investment vehicle. Keeping your goal-specific savings separate from your day-to-day accounts will help you focus on reaching the goal because you’ll be less tempted to spend the money elsewhere.

3. Expand your “rainy day fund”

A basic rule of thumb is for you to have at least three-to-six months of income set aside in an emergency fund. This is money that should be left in cash (such as a savings account or a money market fund) in the event an unexpected financial need occurs. A tax refund is a great way to bolster your rainy day fund if it’s lacking.

4. Focus on being financially independent

If you have any credit card debt, consider first using your refund to reduce this costly form of borrowing. After that debt is eliminated, you may want to focus on tackling any outstanding student loan balances. If you’re fortunate enough to have your consumer debts paid off, think about making an additional mortgage payment. Many Americans make it a goal to pay off their home before they retire, and several lump sum payments can help make this goal more attainable for you.

5. Adjust your tax withholding

If you tend to receive a sizable tax refund each year, a better approach may be to reduce the tax withheld from your paycheck. Rather than giving the IRS a “tax-free loan” while you wait for a big refund, keeping the money may make more sense for you. Apply the extra cash you’ll receive in each paycheck toward your most important goals, such as retirement or a child’s education. Adjusting your withholding may affect your tax situation, so talk to your tax advisor before making a change.

You want to use your refund where it will have the greatest positive impact on your financial situation. If you need help weighing competing priorities, talk with a financial professional who can give you an objective perspective on how to best divvy up your refund.

###

Armando http://www.mdflorhampark.comDiRienzo is a Financial Advisor and Vice President with Metzger, DiRienzo & Associates, a financial advisory practice of Ameriprise Financial Services, Inc .  He offers fee-based financial planning and asset management strategies and has been in practice 17 years. To contact him call 973-549-6702, 200 Campus Dr. suite 150 Florham Park NJ, 07932 or visit www.mdflorhampark.com

Investment advisory products and services are made available through Ameriprise Financial Services, Inc., a registered investment adviser.

Ameriprise Financial Services, Inc. Member FINRA and SIPC

 

© 2016 Ameriprise Financial, Inc. All rights reserved

The opinions expressed herein are the writer's alone, and do not reflect the opinions of TAPinto.net or anyone who works for TAPinto.net. TAPinto.net is not responsible for the accuracy of any of the information supplied by the writer.

TAP Into Another Town's News:

You May Also Be Interested In

Sign Up for E-News

East Hanover/Florham Park

Important Message for Florham Park Residents Regarding the Fourth of July

Important July 4th Celebration Reminder - Please be advised in the interest of safety and security, the entire parade route will be CLOSED TO ALL TRAFFIC beginning at 8:30am on July 4, 2018. This will impact residents who live along the parade route and all of the side streets that connect to the parade route. (Please see the map attached to this post)

Please ensure that you plan accordingly ...

DevCo is building a new version of Rutgers "The Yard." You may be surprised to see where.

June 8, 2018

NEW BRUNSWICK - In 2016, Rutgers University proudly opened “The Yard,” a student housing and retail complex along College Avenue built under the direction of the New Brunswick Development Corp.

Now the corporation, the non-profit development arm for the City of New Brunswick and commonly known as DevCo, is replicating the housing and commercial construction more than two hours ...

Shore Travel Idea - Visit the Debut of Belmar Arts’ Sculpture Garden and Labyrinth - June 2

BELMAR, NJ — Need an excuse to visit Belmar this weekend?  Curious about the eclectic collection of sculpture and other objects that occupies a small corner outside the Belmar Arts Center on River Road?  Why not solve both needs at once?

The public is invited to learn more about the Belmar Arts Sculpture Garden and Labyrinth during its official opening on Saturday, June 2 ...

Upcoming Events

Fri, June 22, 8:00 PM

Education Center, West Orange

Night Moves: Evening Guided Zoo Tours

Education Other

Sun, June 24, 11:00 AM

Mountain Lakes

Art at the Esplanade

Arts & Entertainment

Carousel_image_5e177eaae57739064cd4_397f63ad2fb50392a776_29178074_2107642336134787_2638697507160326144_n

Sun, June 24, 11:00 AM

Totowa

MakerFest 2018

Thirty Days after the Draft

It’s been just about thirty days since the 2018 NFL Draft and the New York Jets have been working hard to build the team fans have been waiting for. Let’s recap the first round draft pick before discussing OTA’s and other Jets info.

Some New York Jets fans were certain earlier in the 2017 season that with the way the win-losses were going, Sam Darnold would be the New York ...

1896 Miles Away But Hanover Park Stands with Sante Fe

June 16, 2018

EAST HANOVER, N.J.- After the awful events at Santa Fe High School last month, students at Hanover Park organized support. Under the supervision of Kim Lurz, and staff assistance, the students created a banner and put together giftbags for the victims of the attack. Recently students from Santa Fe High were featured on the  TODAY show and brought along the banner. 

Hornets ...

Obituaries

Beverly Jean (Charlton) Weimar, of Ship Bottom, and Florham Park, New Jersey passed away on March ...
Read more

Students at the F.M. Kirby Children’s Center of the Madison Area YMCA Release Butterflies  

June 15, 2018

Students at the F.M. Kirby Children’s Center of the Madison Area YMCA learned all about the life cycle of butterflies from their start as tiny caterpillars until they emerged from their chrysalises as beautiful butterflies. They watched in awe as the butterflies were released into their natural habitat. 

The F.M. Kirby Children’s Center of the Madison Area YMCA ...