Tips & Advice

Turn your tax refund into retirement savings and nine more ideas

Presented by the CFS Financial Advisors at Apple Financial Services*

Last year, the IRS sent $324 billion back to taxpayers. Nearly eight out of 10 received a tax refund worth an average of $2,895. If received a substantial income tax refund this year, you might want to think about the destiny of that money.

Rather than having those precious dollars absorbed into your normal spending routine, get the most out of your cash. Here are a few options to consider:

  1. Save for Retirement. About 30% of all working Americans have no money invested for their retirement. If you are one of them, seriously consider making a contribution to an IRA right away. If you haven’t maximized your contributions this year or have a chance to get an employer match, it may be worth considering.


  2. Invest it. Instead of just working for money, let money work for you. If you invested one lump sum of $1,500 in the stock market, more than 30 years at 12% interest (the 30-year market average) you’d have $ 53,924. Be sure to find a good financial advisor to help interpret today’s financial climate, determine objectives, and assess progress toward those goals.


  3. Open an emergency account. Most Americans don’t have money set aside for those financial emergencies that always seem to happen when the wallet is empty. A large tax refund is a great start an emergency account. It should eventually total between three to six months’ worth of essential living expenses.


  4. Pay it forward. Giving back to the community is a wonderful way of supporting a cause that you are passionate about. Even better - in many cases at least a portion of your donation is tax-deductible too.


  5. Plan a vacation. If you are in a fluid financial position, and can truly afford a bit of luxury, do something you’ve been dreaming of. Money is to be enjoyed as well as earned, saved, and invested. Go ahead. Book that flight or start a vacation fund.


  6. Invest in yourself. Investing in your emotional, physical, intellectual, and career growth is a wise use of money. Whether it’s a gym membership or a cooking class, you’ll feel effects of this type of investment fast.


  7. Pay down high interest loans and lines of credit. With average annual interest rates for credit cards and personal loans hovering around 15%, paying off a credit card before making other investment decisions makes good sense.


  8. Pay for repairs. Use the money to repair a leaky roof before it develops into a bigger problem; replace dangerous bald tires, improve your home with energy-saving appliances, windows, or weather-stripping, or solar panels – just to name a few options.


  9. Make an extra home mortgage payment. Doubling up on a mortgage payment now can save you months of payments later.


  10. Save for your child’s college education. Open a Coverdell Education Savings Account to save for a child's education expenses, including tuition, fees, books, supplies, equipment.

Although these ideas are excellent uses for a lump-sum amount of cash, remember that instead of planning for a refund, it’s best to come out even. A tax refund is an interest-free loan to the government, and money that is not in your pocket every month. If you have been getting a refund back each year, consider changing your withholding exemptions so less tax is withheld from each paycheck. While a tax refund may feel like a gift from Uncle Sam, it’s not - it’s money that you have overpaid on your income taxes.

If you’ve been meaning to save more for the future, but aren’t sure how to begin, don’t panic. Schedule your no cost, no obligation consultation with a CFS Financial Advisor at Apple Financial Services.* Together you'll build a spending and saving plan that'll put your best interests first.

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer, (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Apple FCU has contracted with CFS to make non-deposit investment products and services available to credit union members. Apple Financial Services LLC is a subsidiary of Apple FCU and is not directly affiliated with CFS.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.