Tuesday January 17, 2012 06:09
How your tax refund can create financial security
Tax refunds come in really handy when you’re running behind on the rent or bill collectors are ringing your phone off the hook. The refund money is also good for a mini shopping spree or a nice getaway.
But used wisely, a tax refund can create sustained financial security and possibly wealth.
The average tax refund in the U.S. is $2,913, and some families with two or more dependents are getting more than $4,000.
If a 21-year-old splurged 2/3 of the return and put a third (roughly $1,000) for the next 10 years into an indexed or fixed rate annuity at a six percent interest rate, it would be worth $105,000 when the person gets ready to receive full social security retirement at age 67. If the person annuitizes (or requests regular monthly payouts) of the $105,000, he or she will receive at least $1,400 per month for his or her remaining years to go along with monthly social security payments of $700-$1,500. That’s roughly $36,000 a year in retirement at a time when the mortgage and other major bills should be paid off.
If this isn’t enough, keep socking away the tax return into an annuity until retirement to have a quarter million dollars or more to live off of.
The reason I recommend an annuity is because you can lose your life savings if the stock market crashes right before your retirement as it did when the Great Recession began in 2008, and bank savings accounts aren’t even earning 1 percent interest. Indexed annuities mirror the growth of the stock market without the losses while fixed annuities offer a set interest rate. Annuities are the only financial instrument that guarantees a lifetime income, meaning your money never runs out.
To begin your systematic annuity deposits, ask your family and friends for a trusted personal banker, financial advisor or life insurance agent. If you have any questions about annuities, I would be happy to answer your questions at email@example.com.
By Teneshia LaFaye