It’s tax time again, and for most people, that means getting back some green.
In fact, about 80% of taxpayers have gotten some money back from the Internal Revenue Service (IRS) over the last few years, and the average refund for 2019 is expected to be $2,800, according to reports.
And while people have a range of plans for that money—from purchasing a big-ticket consumer item such as a car, or refrigerator, to donating to charity—it might surprise you to learn that many consumers save and invest their refunds, according to recent research.
What people do with their refunds
Here are the most common things that people have said they would do with their refunds, according to a survey from Principal Financial Group:
- Nearly half of taxpayers planned to save or invest their refunds.
- One-third of respondents said they would pay off both short and long-term debt, which could include everything from credit card balances to auto loans and mortgages.
- 12% would spend it on consumer products.
- 9% would spend their refunds on a big-ticket consumer item.
- 8% would give their money to charity.
Stash believes in smart saving and investing, and we think one of your goals should be saving for retirement. Why? About one-third of U.S. consumers have $5,000 or less saved for retirement. (Various estimates suggest you may need as much as $1.5 million to support 30 years without working.)
Additionally, fewer of us are likely to have pensions, and Social Security probably won’t cover your expenses after you’ve stopped working.
Meanwhile, career paths are likely to be unpredictable, and healthcare costs probably will be expensive when you can no longer work.
But the sooner you start investing for retirement, the more money you can potentially accumulate.
Waiting even a few years can dramatically reduce your retirement savings. The following chart shows the difference in your potential nest egg if you start at 25 compared to 35. The person who waits ten years might have almost half as much money in retirement.
Consider Stashing it
Stash offers both traditional and Roth individual retirement accounts (IRAs). The maximum you can contribute to your Stash retirement account in 2019 is $6,000. People who are age 50 and older can contribute an additional $1,000 each year as a catch-up contribution.
Have a tax refund coming your way? Consider stashing it in a Stash Retire account.