April 15 is around the corner and you are anxiously waiting for your lump sum refund, right? I am here to argue that you work on getting a smaller tax return next tax year in favor of a happier retirement. Here is why.
I know that I risk of sounding crazy, but how much does Uncle Sam (the US Treasury for the uninitiated) pay in interest? The last I checked there is no interest paid on over-withheld amounts, aka your tax refund. Put that money to good use now, in investments that will earn you interest.
You would be surprised at how many rightful dependents several employees do not claim. Claim the right amount, and you may have less withheld from your paycheck. Invest the extra $100-$300 into your 401k - a tax deferred investment plan where the amount invested is not taxed in the year of deposit. The only caveat is that it is best left inaccessible until retirement age, currently 59 1/2. There is a penalty for withdrawing it sooner. Do not be disheartened - retirement planning is the cause.
Well, suppose your employer does not have such a plan as the 401(k), other options do exist. For Example the IRA-individual retirement account, 403(b), 457 plan - the list is endless. With proper and thorough research, you may find options that are unbeknownst to an average Joe. A serious investment calls for spending on good financial advisors (CFPs – certified financial planners) - not to be confused with financial brokers. The best things in life are not free in finance! A Fee-Only knowledgeable adviser endeavors to help you attain your goals within the constraints of your resources.
Remember, no one size plan fits all! Do your research and save this message. Remember me when you turn 65!