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# Check this: Put tax refunds toward some long-term goals
- URL: https://www.smdp.com/check-this-put-tax-refunds-toward-some-long-term-goals/
- Published: 2006-02-23T16:00:00.000Z
- Updated: 2026-10-24T23:21:12.000Z
- Author: Guest Author
- Tags: Opinion, Santa Monica, #archive-import

*By BRIAN HEPP*

When tax season is over, and the hassles of filing are through, many Americans anxiously await the arrival of good news — a refund check. And while many people already have that money spent before it even gets there, your tax refund could provide a valuable opportunity to start saving for the future. So, if you can muster the courage and resist spending it right away, there are several options that could make very good use of your refund. Following are a few ideas to consider.

I Put away money for your retirement. One very important thing to remember is that there are no loans for retirement. Once you reach that age, you won’t find anybody who will simply lend you the money to finance your lifestyle and let you pay them back later — because let’s face it, who knows how much longer “later” will last at that point.

Setting aside at least a portion of your tax refund check for some form of retirement savings would certainly postpone the fun you have spending your money immediately. In the long run, however, it could increase the benefit you receive from your refund because the money you put in certain retirement plans is put into various investment vehicles that can potentially grow your money. Not only do you reap the rewards of the potential investment returns, but those returns also accumulate free of taxes, as long as your money remains in the plan.

Individual Retirement Accounts, or IRAs, are one of the most common savings options that have this feature. For tax years 2005 through 2007, the annual contribution limit to an IRA is $4,000\. Depending on how you look at it, that may not seem like much. Also remember that all investments carry some level of risk, including the potential loss of principal invested. However, that money could grow significantly based on the long-term earnings on your investments. In addition, investors over 50 years old are allowed “catch up” contributions to make up for lost time. In 2005, those retirement savers can contribute an extra $500 — bringing the total contribution limit to $4,500\. The catch up amount will increase to $1,000 in 2006 and 2007, thanks to recent IRA rule changes, meaning investors over 50 years old can put away as much as $5,000 each year.

I Save for a college education. Once you’re on your way to establishing a decent retirement fund for yourself, you can turn your attention to other financial priorities that may be looming on the horizon. College costs have been rising at dramatic rates over the last several years. To help meet those rising costs, several savings alternatives have been designed specifically to help cover college costs.

One way to save for education expenses is through a Coverdell Education Savings Accounts (ESA). Formerly known as an Education IRA, this savings plan allows contributions of up to $2,000 each year, and you also benefit from tax-free accumulation of your earnings. In addition, if you use the funds for education expenses, they will be free from federal taxes when you withdraw them.

Coverdell funds also can be used for qualified secondary and elementary education expenses, and you can fund an ESA in the same year you put funds into another type of education savings account. There are certain income limits associated with these accounts, but if you fall within the income guidelines, you can use a Coverdell to start setting aside money now to help ease the financial burden that you know is on the way.

Whether it’s saving for yourself, or saving for your children, putting money away now for later use is never a bad idea. These are just some of the ways you can take advantage of your tax refund money, and possibly make even more out of it than just the amount on the check. (Brian Hepp is a financial consultant for Santa Monica-based A.G. Edwards & Sons, Inc. Member SIPC. He (310) 453-0077 or at A.G. Edwards is a full-service retail brokerage firm that offers a complete spectrum of financial products and services, including stocks, bonds and mutual funds, financial retirement planning and tax-advantage investments.)

*Originally published in the Santa Monica Daily Press print edition on February 23, 2006.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/022306.pdf?ref=smdp.com)