Invest In Your Retirement With That Tax Refund
BOSTON (CBS) - I talked to a reporter last week and she was asking financial planners what we would do differently if we could. I said save sooner for retirement. We saved when we were first married but we used those savings for an emergency fund, to build a home, go to grad school and start a family thinking that retirement was so very far away.
Invest In Your Retirement With That Tax Refund
Workers put off retirement planning because the goal seems so far away. At age twenty-five, something that will happen to you in 42 years is a lifetime away.
So consider taking that refund and investing it in your future. Increase your contribution to your retirement plan at work by the amount of the refund. Then use those refund dollars to make up the lost income over the remainder of the year.
If you don't have a retirement plan at work consider using an IRA for retirement savings. The IRS allows direct deposit for your refunds, permitting you to divide your refund among up to three accounts.
Use form 8888 to make it really easy. Just fill it out when you file your taxes and the IRS will send the money directly to your IRA.
You can contribute up to $5,500 this year and if you are over 50 there is a catch-up provision and you can add an extra $1,000.
A $3,000 addition to your retirement account at age 40, assuming a 8% return by the time you're 67, could be worth almost $24,000. Do that every year for the next 27 years and you could have close to $300,000 ($286,000) in your nest egg.
A listener wanted to know where he could get an 8% return. I can't promise you a guaranteed 8% return but Fidelity's Puritan fund, which is a balanced mutual fund comprised of stocks and bonds, has had only 12 down years since 1948. Their Balanced fund has had 4 down years in 28 years. Five years average over 11% for both funds.
No one has ever been guilty of saving too much money for retirement or starting too early! So if you use your refund to do some retirement planning you will be so ahead of the curve!
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You can hear Dee Lee's expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m., 3:55 p.m., and 7:55 p.m.
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