3 Things You Should Do With Your Tax Refund

By Deborah Jeanne Sergeant

 

Tax season is upon us. Do you know what you’ll do with your tax refund?

Splurging on a trip or a kitchen renovation may seem like a fun way to spend the windfall, but before you go on a spree, consider using the money more wisely, such as paying off debt.

“For young adults in their 20s and 30s, it’s ‘found money’ in their budget,” said Jeff Feldman, Ph.D., certified financial professional at Rochester Financial Services in Pittsford. “But for most people 55-plus, if you have credit card debt, put it towards that. I have to be a killjoy and say don’t buy yourself something, but from a financial standpoint, you should pay off debt, starting with a high-interest rate debt.”

If you still owe money on the mortgage, pay it down. Ideally, you should have the house paid off before you retire and paying it down with any windfalls can help.

Aside from that, experts suggest these three moves:

 

1. Boost your nest egg

“If you have no debt, you can contribute to a retirement plan,” Feldman said. “You can make an IRA contribution if you get it by April 15. Saving the money is always a good idea.”

Talk with your financial planner to see if you should add the money to any additional accounts for maximum results.

 

2. Prepare for emergencies

Delise Whitfield, financial representative with Primerica Financial Services in Rochester, encourages people receiving tax refunds to plan for a rainy day.

“If they don’t have an emergency fund, use it to start one,” Whitfield said. “Most people 55-plus, they get a few hundred to a few thousand, but most emergencies are under $1,000.”

According to Bankrate’s 2025 Emergency Savings Report, 16% of people aged 61 to 79 lack emergency savings. A major car repair bill, failed appliance or emergency medical bill can devastate the budget if there’s no emergency fund for unexpected expenses.

Another way to prepare for hard times is to “stock up like toiletries for the year. Or pay a few small bills ahead like RG&E, Wi-Fi or cell service,” Whitfield said. “It can give you three to six months of breathing room. If they have a larger return, pay the rent or mortgage for a few months ahead.”

 

3. Take care of your assets.

A tax refund can also help you maintain your home and vehicle so they last longer and to forestall a major bill in the future.

“Get any repair work done that you’ve been putting off, like new tires for the car and things you need to get done on your house,” Whitfield said.

If you have a leak in the roof, for example, getting it fixed now can prevent water damage that can compromise your home’s integrity.

You can also talk with a contractor about making home modifications that can help you age in place if that’s your plan. For example, widening doorways and making other changes like adding a first-floor full bathroom and bedroom. This can also add value to your home even if you decide to downsize later.