At this point, many people have filed their tax returns, and the refunds have started rolling in. As of March 13, the average refund issued by the IRS was $3,623. That’s about an 11% increase from the same period last year.
If you have a big tax refund coming up, it’s important to put that money to good use. And the first priority is to make sure you have a strong emergency fund.
Will AI create the world’s first trillionaire? Our team recently released a report on one little-known company, called “Indispensable Monopoly” that provides essential technology needed by both Nvidia and Intel. Continue »
But as long as you’re ready to save for the near term, you should consider using your tax refund to save for the long term. Here’s how you can use money to boost your retirement savings this year.
The great thing about IRAs is that anyone with an income can open one. So even if you’re a gig worker without a steady employer, you can start your own IRA and contribute your tax refund as seed money.
You can also choose between a traditional IRA and a Roth. Traditional IRAs give you a tax break on your money, and the gains are tax-deferred until you retire. As with exchanges, you are taxed on withdrawals and ultimately forced to take them in the form of required minimum distributions (RMDs).
Roth IRAs are funded with after-tax dollars. But investment gains are not taxed and so are withdrawals. And there are no RMDs to worry about.
If you have a 401(k) plan through work, you can use your tax refund to increase your savings rate. You may have already told your employer before the start of the year how much you want to contribute to your 401(k) in 2026. But you are allowed to increase (or decrease) your 401(k) contributions mid-year.
All you need to do is tell your HR department how much of your pay you will allocate to your 401(k). Then, what you can do is hold on to your refund and use the money to make big deductions from your paycheck.
For example, let’s say you received a refund of $3,600, so you tell your employer to deduct an extra $400 per month from your paychecks from April to December. You can then deposit your refund into a savings account and tap into $400 per month as needed to ensure you can cover your expenses.
Although a tax refund is a temporary windfall, using yours wisely can set you up for a more secure future. So it pays to use your tax refund to increase your retirement savings if you don’t have a pressing need for that money.
If you’re like most Americans, you’re a few years (or more) away from saving for your retirement. But a few are little known “Social Security Secrets” it can help ensure an increase in your retirement income. For example: one simple trick can pay you as much as $23,760 more… each year! Once you learn how to maximize your Social Security benefits, we think you can retire confidently with the peace of mind we’re after.
Many Americans leave money on the table in retirement. Learn more about these retirement strategies and more, available when you join Stock Advisor.
View “Secrets of Social Security” »
The Motley Fool has a policy of disclosure.
How to Use Your Tax Refund to Increase Your Retirement Savings in 2026 was originally published by The Motley Fool.
