What to Do with the Tax Rebate

Posted by: Sophie H. | Apr 11,2008


Most everyone can expect a nice little rebate coming this year as a part of President Bush’s stimulus plan.  Some people can expect more than others – especially those with dependents.  Retirees probably don’t have many dependents (unless you’ve been really busy!) but still people looking to save for retirement can expect a little special something in this year’s rebate.  

So how should you use the rebate for your retirement plan?  Putting the rebate directly into an IRA account makes sense.  Let’s say you’re getting a $1200 rebate.  Whether you’re deep into saving for retirement or you’re just starting out, that $1200 can be put to good use.  If you’re just starting out saving for retirement, make this the beginning savings that you’ll match year to year.  If you put in $1200 a year, every year, this will build up at a healthy clip.  People who have established retirement accounts can consider this an extra bonus.  However, if you’re ahead of the game in terms of retirement savings and paying down debt, then you can rationalize using the $1200 for play time.  

As with any liquid funds, you have to choose carefully.  I always looking to your credit card or other debt before pouring too much money into an IRA account or savings account.  This extra money could be used to pay down excess credit card debt and you can then deposit money into a retirement account the way you have been normally.  If you have a bulk of high-interest credit card debt, don’t automatically put the rebate into savings, as you should get the debt out of the way as soon as possible.  

If you’re depositing into an IRA, time is of the essence.  April 15 isn’t just the deadline for filing taxes but for making a deposit into an IRA account that will be recorded for the previous year.  You can deposit the $1200 (or whatever it is for your demographic) now, knowing that you’ll be getting the rebate check months from now.  Don’t think about depositing the money once the check arrives in the mail because you want to reap the benefits of depositing money into a high-yield account as early as possible.  

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