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How to be Smart About Your Tax Refund

March 21, 2019 - Retirement Planning & Investments

Information from UMassFive Financial & Investment Services & CFS* to help keep your financial life in balance.

If you’re expecting a tax refund, you’ve probably already asked yourself, “What should I do with it?” Before you book your vacation, you may want to consider other options for your tax refund. Here are some helpful tips while you decide what to do with your tax refund.


Forty percent of U.S. households live paycheck to paycheck. For many people, a drop in their income (Like a government shutdown) or an unplanned expense can hit hard. A tax refund is an annual opportunity to put money away for a rainy day. Having an emergency fund available will ease the stress over unforeseen expenses down the road.


High balances and high finance charges can put a real drain on your wallet and limit your financial options. If you let those balances linger long enough, they could keep you from achieving other important goals and dreams, such as buying a home. Whatever your financial goals and dreams, paying off high-interest credit card debt is the first important step in the right direction.


Health savings accounts (HSA) are tax-deductible savings plans that allow a taxpayer to save pre-tax dollars for future healthcare expenses. It can also be used to pay for current medical expenses. Earnings, such as interest and dividends, in the HSA are tax exempt at the federal level. Contributing to your HSA plan not only allows you to save money for medical expenses but uses pre-tax dollars!


When it comes to working toward a more secure retirement, there are many strategies. However, the best way to take control of your financial future might be simply increasing your retirement plan contribution amount. Even a small contribution from your tax refund can boost your finances in retirement. How much should you contribute? Only you can decide how much the right amount is, you may want to consult with your financial professional for assistance.


For many people, this year’s tax refund will go to paying off debt or will be deposited into a savings account. A decent tax refund can be more than a quick fix to household finances. If you plan to retire in comfort, it’s crucial to put your savings to work! Keep in mind that if you get a 5% rate of return each year, $2,500 today turns into almost $8,500 in 25 years, more than tripling your savings. You can speak with an experienced CFS* Financial Advisor here at UMassFive to discuss long-term investing ideas to generate a return on your tax refund.


After you’ve completed your 2018 tax return, it’s never too early to start planning for next year. The beginning of the year is a great time to start tracking your tax-related receipts and stay organized.

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. ("CFS"), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. UMassFive College Federal Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.