What do you plan to do with your tax refund? Many people spend their tax refund on a whim. I encourage you to put a little more thought into it. Here are 5 ideas on how to spend your tax refund wisely.
- Make your 2013 IRA contribution now
- Contribute to a 529 Plan
- Create Estate Documents
- Payoff Credit Card debt
- Get Financial Planning help for family
Put the entire refund amount toward funding your 2013 IRA contribution. You may contribute up to $5500 for an individual in 2013 (unless you are age 50+ then the maximum is $6500) into a Roth IRA assuming your income falls below the government thresholds. The thresholds or phase outs for singles in 2013 is $112,000-$127,000 and for married couples, is $178,000-$188,000. If you anticipate that your earned income for 2013 will be higher than the Roth IRA phase out thresholds, you can still contribute to a traditional IRA.
Start a tax-sheltered 529 college savings plan to fund your children’s or grandchildren’s educations. If you plan to pay private school tuitions through secondary school, you should consider funding a Coverdell Education Savings Account (ESA). The Coverdell phase-outs in 2013 are Single- $95,000-$110,000 and for Married Filing Jointly – $190,000-$220,000.
Use your refund money to engage the services of an estate-planning attorney. If you do not have a will then have one drawn up. Without a will issues such as child guardianship and disbursements of assets will not be decided by you, but rather by the laws of your state. For some families, additional estate planning documents may be needed.
If you have credit card debt, pay off as much as possible. For free credit reports go to www.annualcreditreport.com. Use part of the money to obtain your credit score from www.FICO.com (the rating that shows how credit-worthy you are). Correct any incorrect items on your credit report and work to keep your report clean. To strengthen your credit score make your payments on time and do not take on more debt than you should. Try to live below your means.
Purchase a gift certificate, for a set amount of professional financial advice, for a loved one. If you do not want to pay for a complete financial plan, find a financial planner who like me works by the hour. You can find other Hourly Fee-Only Financial Planners in your area by visiting the Garrett Planning Network.
What do you plan on doing with your tax refund?
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Author
Isaac is a Fee-Only (no products sold) Certified Financial Planner® Practitioner. Isaac founded Stalwart Financial Planning with offices in Fayetteville NC and Durham NC. Isaac provides comprehensive planning and investment management services to individuals from all walks of life. Isaac can be reached by phone at 910-867-8464, or by email (iallen@StalwartPlanning.com). Visit him at Stawart Financial Planning www.StalwartPlanning.com.