Use Your Tax Refund
Wisely !
This article was written by Edward Jones for use by Brian Callaway , Financial Advisor
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 . If a market downturn hits one asset class , and that ’ s where you keep most of your money , you could take a big hit . Owning an array of investments – such as stocks ,
Call or stop by our office for more information or to schedule a complimentary portfolio review .
Making Sense of Investing . Brian Callaway
Financial Advsior 863 Flat Shoals Road , Suite 300 , Conyers , GA 30094
770-918-0725 • www . edwardjones . com
Member SIPC bonds , certificates of deposit , and so on – can help prepare your portfolio to weather the effects of market volatility , By adding new investments , or increasing your holdings of existing investments , you may be able to further diversify your portfolio – and you can use your refund for this purpose . ( Keep in mind , though , that diversification , by itself , can ’ t guarantee profits or protect against loss .)
Contribute to a 529 plan . If you have children or grandchildren whom you ’ d like to help send to college , consider using your tax refund to help fund a 529 plan . Your 529 plan contributions may be deductible from your state taxes , and your earnings are distributed tax-free , provided they are used for qualified higher education expenses . ( However , withdrawals not used for higher education expenses may be subject to both income tax and a 10 % penalty .)
Pay off some debts . You can help improve your financial picture by reducing your debt load – but it may make sense to prioritize these debts . For example , rather than make an extra mortgage payment , you might want to first tackle those debts or loans that carry a high interest rate and that don ’ t allow you to deduct interest payments . After all , your monthly mortgage payment will remain the same even if you make an extra payment , but if you can get rid of some smaller debts , you will free up some cash that you could use to invest for your future .
Think carefully about how to use your tax refund . It represents an opportunity that you won ’ t want to waste .