Rebuild Your Emergency Fund Using Your Refund Money

“File your tax online and get refunds fast.”” Use our e-file software to file your 1040 online and get the maximum refunds.” You have probably heard or seen one of these or similar ads online when you were filing your tax return online. And if you believed them and followed them you probably realized that they were mostly right. That is right, you definitely get your refund faster if you e-file your tax, and mostly the refund can be higher also. So you probably have thousands of dollars of your refund money lying with you and do not know what to do with it. One thing that we need to think about is our retirement plans and we can use our refund money to fulfil these plans and have a better post retirement life. Here is what you can do with your refund money.

You have until April 15 to contribute up to $5,000 to an IRA for 2009 (or $6,000 if age 50 or older). If your modified adjusted gross income is $120,000 or less if you're single, or $176,000 or less if you're married filing jointly, then you can contribute to a Roth IRA, which lets you withdraw the money tax-free in retirement.

If you earn too much for a Roth, you can contribute to a nondeductible traditional IRA, then convert it to a Roth.

If you are just like several other people that have filed their 1040 or 1040ez forms online and have gotten your tax refund from the Internal Revenue Service then you probably have thousands of dollars lying there with you and thinking what to do with them. With the average refund size for last year being a little over $2500 and a little over $3000 for the current year, you are bound to have all that extra cash lying around with you. One good place to invest this money is to replenish your emergency fund that you used up last year. Many people raided their emergency funds last year and then had little extra money to restore them.

You can use your refund to start rebuilding this crucial fund for yourself. Having this fund can avoid you landing in credit card debt in case you have an emergency. You can keep the money easily accessible in a money-market account or savings account that earns interest.

Thus you can put your money to good use in this way and be prepared for future times. I know it might be tempting for you to go to Vegas with all that cash at hand, but one must also save money for bad times if they want to get out of it easily. Think about the refunds that you will get while you file your tax online.

Take this advice and use your refund money to have a better life after retirement.