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Monday, May 27, 2013

Free Money Finance - on tax refunds, investment, increase retirement


Free Money Finance

Posted: 15 May 2013 01:29 AM PDT
The Wall Street Journal lists the average tax refund as follows:
  • Income: $25k-50k; Average Refund: $2,774
  • Income: $50k-75k; Average Refund: $3,051
  • Income: $75k-100k; Average Refund: $3,657
  • Income: $100k-200k; Average Refund: $4,704
I'm wondering if these are too high or not. On one hand, it seems like a lot of money that's "loaned" to the federal government each year. The people making $25k a year are shelling out too much -- to the tune of 10% of their income (unless their refunds are based on earned income credits and the like which they don't have to pay for).
On the other hand, if you make $150k a year, $5k probably isn't that much off. You probably have a whole lot of tax issues to deal with and getting closer to $0 is difficult to do.
We owed money this year, so I guess the government gave us a loan. :) It seems to run in cycles depending on my annual bonus as well as (lately) investments in real estate -- we owe one year, then get a refund the next. No real pattern that I can see.
What's also interesting is what they say to do with the refunds:
1. Pay off your credit cards
2. Take a course
3. Increase your 401(k) contribution
4. Pay down your mortgage
5. Gamble on … Italy (Invest)
Can't say I disagree with any of these, though the last one seems like it was added to be "cute". Personally, I'd go with a stock index fund from Vanguard or save the cash to be used for investment in real estate.
What's your take on these numbers? Too high or are they "ok"?
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