Use your tax refund wisely
It’s tax time again – which for many Americans means that a tax refund is on its way. If you’re going to get a refund this year, how can you use the money to your best advantage?
Of course, it’s always tempting to spend the check from Uncle Sam on something fun. But a tax refund could be sizable – the average amount in 2016 was $2,857, according to the IRS – so putting this money to work could help boost your progress toward your financial goals.
Here are some possibilities for using your refund:
Help fund your IRA. If you were to receive a tax refund of $2,857, you’d have slightly more than half of the $5,500 annual IRA contribution limit for 2017, although, if you are 50 or older, you can contribute an extra $1,000. Consequently, you may find it much easier to fully fund your IRA for the year — and you should do exactly that, because an IRA is a great retirement savings vehicle. If you have a traditional IRA, your contributions may be fully
or partially deductible, depending on your income, while your earnings can grow tax deferred. (Taxes are due upon withdrawal, and withdrawals prior to age 59½ may be subject to a 10% IRS penalty.) With a Roth IRA, your contributions are not deductible,
but your earnings are distributed tax-free, provided you don’t start taking withdrawals until you’re 59½ and you’ve had your account at least five years.
Help diversify your portfolio…
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