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Your Tax Refund: Invest In Your Retirement

BOSTON (CBS) - I have never met anyone who has saved too much for retirement. Young workers today put off retirement planning because the goal seems so far away. At age twenty-five, something that will happen to you in 42 years is a life time away. But from experience I know that the years slip by quickly.

So consider taking that refund and investing it in your future. Increase your contribution to your retirement plan at work by the amount of the refund. Then use those refund dollars to make up the lost income over the remainder of the year.

If you don't have a retirement plan at work consider using an IRA for retirement savings. The IRS allows direct deposit for your refunds, permitting you to divide your refund among up to three accounts.

Use the IRS' form 8888 to make it really easy. Just fill it out when you file your taxes and the IRS will send the money directly to your IRA.

You can contribute up to $5,500 this year and if you are over 50 there is a catch up provision and you can add an extra $1,000.

A $3,000 addition to your retirement account at age 40, assuming a 7% return by the time you're 67 could be worth almost $19,000, do that every year for the next 27 years and you could have close to $225,000 in your nest egg.

If you are 25 and invest your refund every year until you are 67 you could have close to $700,000 in your retirement plan.

A listener wanted to know where he could get a 7% return. I can't promise you a guaranteed 7% return but Fidelity's Puritan fund, which is a balanced mutual fund comprised of stocks and bonds, has had only 14 down years since 1948 and 54 positive years. Fidelity's Balanced fund has had only 4 down years in 29 years. Average return over 7%. Not every year, but the average.

No one has ever been guilty of saving too much money for retirement or starting too early! So if you use your refund to do some retirement planning you will be so ahead of the curve!

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