Let me start by saying that I don’t advocate getting a large income tax refund back. In fact, I suggest adjusting your payroll tax withholdings so that you’re making the most of your income throughout the year. Getting a sizable income tax refund back every year essentially means that you are giving the government a free loan. And as you probably know, they will definitely not return the favor for you, so why give them free money.
Another reason why I dislike large income tax refunds is that we often have the tendency to splurge or spend impulsively. An income tax refund no different than any other windfall. Without a clear plan, having a pile of cash fall into your lap can quickly turn from a blessing to a curse. If you’re anticipating a tax refund, I have 5 suggestions to make sure that you’re getting the best bang for your buck.
- There are no required minimum distributions (RMDs) with Roth IRAs in retirement, so it’s a great tool to pass down wealth to your kids and grandkids
- Roth IRAs offer flexibility. You can make qualified withdrawals
- You must have earned income in order to contribute to a Roth