DeFreitas & Minsky Accounting Blog

Smart Options for Investing Your Tax Refund for Retirement

Posted by thallissey on Apr 16, 2015 7:07:26 AM

investing your tax refund for retirement

After tax day, we are rewarded with the fun task of deciding what to do with our income tax refund. Before buying anything this year, consider some of our smart strategies for investing your tax refund for retirement.

Strategies for investing your tax refund for retirement

investing your tax refund for retirement

It pays to put money away for retirement now, because a dollar saved this year can gain greater value over time. After acing your IRS deductions, investing your tax refund for retirement can help you enjoy financial stability through your golden years.

1. Invest conservatively

If you are planning for retirement, even Warren Buffett suggests investing conservatively. Try investing in low cost index funds rather than picking the hot stocks of the moment. As you approach retirement, decreasing your stock portfolio is another viable option to prevent a stock market dip from impacting your savings.

2. Roth IRA

Tax experts suggest maxing out your retirement contributions as you approach 65. For those age 50 and above, $6,000 can be contributed to a Roth IRA, a retirement plan that is generally not taxed. But don’t forget IRAs, which have a $22,000 limit for anyone age 50 and older.

3. Health Savings Accounts

Contributions to Health Savings Accounts, which are paired with a high-deductible health insurance plans, are not subject to federal income taxes. As a result, they may be invested into like an IRA. A Health Savings Account’s funds roll over each year. Any remaining money in these accounts may be used freely in retirement.

4. Build an emergency fund

Most people intend to save money for a rainy day, but few do. Research indicates few Americans have put away the suggested three to six months of reserve expense funds. Without this vital safety net, people are vulnerable to losing a car or home during tough times. We suggest investing your tax refund for retirement by rebuilding your rainy day reserves today.

5. Decrease debt

Another excellent use of your tax refund dollars is to decrease your debt load. Carrying high-interest debt, like big credit card balances, will cost you more money on interest later.

As part of personal financial planning, it often makes more financial sense to invest rather than spend. If you are approaching your golden years, try investing your tax refund for retirement.

At DeFreitas & Minsky, we specialize in all aspects of tax returns on Long Island. If you need advice about ways to invest a tax return for retirement or would like any other assistance, please call DeFreitas & Minsky Certified Public Accountants at 516.746.6322 for more information.

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Topics: Financial Planning, retirement, investment

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