"Retirement accounts such as a 401(k) or an IRA help sock-away money for the future while providing valuable tax savings," says Keith Brannan, vice president of Financial Security Planning for COUNTRY Insurance & Financial Services. "If you are not taking advantage of these accounts, you could be missing an opportunity to pay less in taxes. More importantly, you could also be missing an opportunity to use those funds to meet future retirement goals. Learning about them or talking to a professional can help you improve your financial security."
Brannan also encourages Americans to consider investing any tax refund they might receive this year. The COUNTRY survey shows that while 30 percent of Americans received a significant income tax refund last year, less than half (46 percent) used that "found money" toward improving their long-term financial security.
"As you prepare to file your taxes and receive financial information from your employer, now is the perfect time to evaluate your overall financial picture," adds Brannan. "With predictions that 2008 may be a tough economic year, people may find a need to focus on spending behaviors."
Tips for long-term tax savings
- Contribute to an IRA or 401(k) if you are not doing so already. The contributions you make can be tax deductible. If your employer offers a match on your 401(k), contribute enough to receive all of the match.
- If you are an empty nest parent, consider maxing out your 401(k). This could help replace a lost tax deduction, since you can no longer claim your children as dependents.
- Invest in a mutual fund focused on long-term capital gains. Long-term gains are treated more favorably at tax time.
- If you own a small business, set up a sponsored retirement plan. They money you spend to match your employees' contributions is tax deductible.
