Tax season is an exciting time for some folks. Sure, you have to sit down and fill out some forms, do some math. But what do you get for your efforts? A big, fat check—on average, about $2,700 last year.
But what if that check actually cost you $86,000? What if it cost you $900,000? Would you be so excited about it then?
The majority of taxpayers will spend their refunds on bills and everyday expenses—and if you’re in debt, you should use that extra cash to pay it off. But if you’re debt-free, invest that money and boost your retirement savings.
Invest It! Don’t Spend It!
Here are two things you can do now:
First, invest your refund this year! As we mentioned above, the average refund is $2,700. Invest that in good growth stock mutual funds, and it could be worth $86,000 after 30 years.
Second, don’t let that extra money go to waste again! Start investing next year’s “refund” today by changing your federal tax withholding with your employer. With extra money in your paycheck, you can increase your monthly contributions to your 401(k) or Roth IRA. Using our $2,700 average refund amount, that’s $225 a month!
Keep that up for 30 years and you’ll have nearly $900,000 for retirement!
Don’t Wing It!
As you can see, small amounts of money today can add up to huge amounts later! The more you save on your taxes, the more you can potentially build your retirement savings. It’s best to work with a tax professional to make sure you’re getting all the deductions and credits you qualify for.
And when the time comes to invest, you should consult an investing advisor who has the knowledge and skill to make the most of the money you’ve worked hard to earn.