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How to Use Your IRS Refund To Jumpstart Your Retirement Savings

February 01, 2019

2 min read

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.

0%
of taxpayers get some money back from the IRS
$0
average expected refund for 2019

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:

Retirement saving

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.

See disclaimer1

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.

Make your future money

Learn more about Stash Retire

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Disclaimer1: Expected returns or probability projections are hypothetical in nature and may not reflect actual future results. This is a hypothetical illustration of mathematical principles, is not a prediction or projection of performance of an investment or investment strategy, and assumes weekly contributions at an annual rate of a 5% return (compounded annually) and does not account for fees or taxes. It is for illustrative purposes only and is not indicative of any actual investment. Actual return and principal value may be more or less than the original investment.

By Jeremy Quittner
Jeremy Quittner is the senior writer for Stash.

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