How To Get the Most Green from that Tax Refund

It's take time again and for many Americans that means a tax refund is on the way.

So how can you use the money to your best advantage.

Brenda Merschdorf of Edward Jones Financial was a special live guest Friday on the CBS 58 News at 4 with some of the company's best advice.

The average amount of a tax return in 2016 was $2,857 according to the IRS.

Edward Jones says you should seriously consider using the refund to help fund your IRA.

If you were to receive a tax refund of $2,857, you'd have slightly more than half of the $5,500 annual IRA contribution limit for 2017. Although if you are 50 or older, you can contribute an extra $1,000.

If you have a tradition IRA, your contributions may be fully or partially deductible, depending on income, while your earnings can grow tax deferred. (Taxes are due upon withdrawal, and withdrawals prior to age 59  1/2 may be subject to a 10% IRS penalty.)

With a Roth IRA, your contributions are not deductible, but your earnings are distributed tax-free, provided you don't start taking withdrawals until your 59 1/1 and you've had your account at least five years.

Other considerations include diversifying your portfolio by owning an array of investments from stocks to bonds to certificates of deposit. This can help your portfolio weather the storm of a volatile market.

Edward joins say you may want to consider contributing to a 529 plan. If you have children or grandchildren whom you'd like to help send to college, your 529 plan contributions may be tax deductible from your state taxes, and your earnings are distributed tax-free, provided they are used for qualified higher education expenses.

Of course you could always pay off some, if not all, debt. This will improve your financial picture by reducing debt load. Prioritize which debts need quicker attention. For example, rather than make an extra mortgage payment which will remain the same even if you make an extra payment. So, it might be better to tackle smaller debts so you don't carry a high interest rate.

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