you may have in other
parts of your investment
portfolio.
Pay insurance
premiums. Nobody
likes paying insurance
premiums. Yet, if you have
anyone depending on you,
you will certainly need life
insurance, and possibly
disability insurance, as
well. And if you want
to help protect your
financial resources later
in life from threats such
as an extended — and
hugely expensive — stay
Getting a Tax Return?
USE IT WISELY
It’s tax time! For many of us, it’s when we
refund. For those of you expecting to get
one, the logical question is, what should
you do with it?
You could just spend the money on something you want,
but if you’d like to maximize the financial benefits from
your refund, you should consider these options:
Invest. In 2019, the average tax refund was about
$2,700. This was in part due to changes in the tax
laws and the failure of
taxpayers to adjust their
withholdings in response.
However, if you were to
receive $2,700, you’d be
almost halfway to the
annual IRA contribution
limit, which in 2020, is
$6,000. (If you’re 50 or
older, you can put in up
to $7,000). If you have
already “maxed out” on
your IRA, you could use
your refund to fill in gaps
in a nursing home, you
also may want to consider
long-term care insurance.
Your tax refund could
help pay for some of
these premiums, boosting
your cash flow during
the months you would
normally be making these
payments.
Contribute to a
college fund. It’s
never too soon to begin
saving for college, which
has grown increasingly
expensive over the last
several years. So, if you
have young children, you
may want to think about
investing some or all of
your refund into a collegesavings
account, such as a
tax-advantaged 529 plan.
Pay off debts. Pay
down or perhaps even pay
off some of your debts.
The lower your monthly
debt load, the more money
you will have available to
invest for the future. Keep
in mind, though, that
you might not want to
look at all debts the same
way. For example, putting
extra money toward your
mortgage might help you
pay it off faster, but you’ll
also be funding an asset —
namely, your house — that
might not provide you
with the same liquidity
as you can get from
investments such as stocks
and bonds.
Build an
emergency fund.
By building an emergency
fund containing six to 12
months’ worth of living
expenses, you can help
yourself avoid dipping
into your long-term
investments to pay for
large, unplanned-for
bills, such as a major car
repair or an expensive
dental procedure. Your
tax refund could help
build such a fund, with
the money ideally being
placed in low-risk, liquid
vehicles.
Clearly, you can help
yourself make progress
toward a number of your
financial goals with your
tax refund, so put it to
good use.
EVERYTHING money
Kevin Chancellor is a licensed financial advisor who
manages the Palm Bay branch of Edward Jones.
He specializes in helping individuals, families, and
business owners in the areas of retirement planning,
tax savings, estate considerations, and education
savings. He has served as board chair for the Greater
Palm Bay Chamber of Commerce and works with
various charities throughout the county.
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