(RepublicanInformer.com)- Although filing taxes isn’t the most pleasurable financial activity, millions of Americans expect a sizable return from Uncle Sam. According to the Internal Revenue Service, approximately 9 million Americans have already received refunds this tax season, totaling more than $20 billion. What should you do with your tax refund?
Many financial experts advise using it initially to pay off any high-interest debt, such as credit cards or personal loans. After that, you may consider funding your emergency fund with a sufficient quantity of cash. If you’ve covered all of your bases, the next step is to create and enroll in a regular or Roth IRA, which may help you build your retirement savings.
According to the IRS, the average tax refund for this year is $2,323. As the final weeks of the tax season pass, that figure is projected to shift. Last year’s tax season began a month later due to the epidemic.
Many financial experts recommend paying off any high-interest debt first, such as credit cards or personal loans. After that, you might want to consider setting up an emergency fund with a sufficient quantity of cash. If you’ve covered all of your bases, the next step is to create and invest in a regular or Roth IRA to help you increase your retirement savings.
Use your return to pay off any high-interest debt you may have, like credit card debt. If you’ve taken care of it, you might consider adding it to your emergency fund. By doing so, you can guarantee that any debt that is accruing interest is being paid down and safeguard yourself in the event of an unanticipated occurrence, such as job loss or sickness.
However, assuming your debt and emergency savings are in order, a tax refund of that amount might help you make significant progress toward retirement by filling your regular or Roth IRA account.
A Roth IRA is a tax-advantaged account that allows Americans to save for retirement outside of their company’s 401(k) plan (k). You may put your money to work in a Roth IRA by investing in individual stocks, ETFs, or index funds.
Money is deposited into a Roth IRA after it has been taxed. This differs from a standard IRA or 401(k) in that contributions are made before taxes are deducted. However, when monies are placed in a Roth IRA, they grow and compound over time and may be taken tax-free when you reach the age of 59 and a half.