Now that the deadline has passed to submit your taxes, you may dreaming about what to buy with your refund check, but the president of a wealth management group in Bethesda believes your time would be better spent making sure you don’t receive a refund next year.
According to Charlie Meyers of Meyers Meighan Wealth Management, receiving a refund means you let the government hold onto your money for a year when you could have been investing it and making more money.
But if you do receive a refund, first, use it to pay down debts, such as college tuition, and then invest the rest of that refund check so you’ll have money coming in even when you are no longer working, Meyers said.
“Everybody needs to save,” he said. As the age to collect full retirement benefits from the government keeps creeping upward, people will need to have more money saved for their senior years.
“The biggest fear everybody has is they are going to outlive their money,” Meyers said. People also are concerned they will not have enough money to pay for health care as they age, he said.
The best way to deal with this, according to Meyers, is to put as much money as you are legally allowed, or can afford, into retirement accounts. If you are fortunate enough to work for a company that matches your contribution, try and “at least match” the amount your company puts in, he said.
As for investing on your own, Meyers frowns upon throwing your money into banking accounts or certificates of deposit which offer a very small return. Instead, he recommends buying blue chip stocks for a more significant financial return. His five favorites are Colgate-Palmolive, Clorox, Kimberly-Clark, Procter & Gamble and Johnson & Johnson. These companies have increased their dividends year after year for more than 25 years, he said.
Other smart places to invest that tax refund are tax-free individual retirement accounts or mutual funds, he said.
Realistically, most things are going to cost more in the future, Meyers said, pointing out that about 50 years ago, he paid $1 for three gallons of gas and $269 for his first semester at University of Maryland.
Young people today don’t necessarily want to own their own home, preferring to live in a city and not own a car, and spending money on entertainment and food. Their biggest expense, by far, is paying back their student loans, he said.
“There is more student debt in this country than there is credit card debt,” Meyers said.
Another suggestion is to put some of a tax refund in a college 529 plan so that children won’t be loaded down with student debt when they attend college.
It’s tempting to take that tax refund to the nearest furniture, car or boat store. But Meyers strongly recommends, “Don’t ever buy a boat. Find someone who has a boat.”
When it comes time to fill out your taxes, aim to break even and neither get a refund nor pay more money to the government, he said. To make that work, he suggests changing the number of exemptions you take or increasing your deductions.
After all, Meyers said, “it’s not what you make, it’s what you keep.”