We see these types of articles every year, and there’s a reason for that. A tax refund is not free money. In fact, it’s returning free money that you gave to the government. It’s the difference between what you actually owed and what was withheld from your paycheck. You could (and should) have had access to that money throughout the year.
But you also want to keep it in perspective. Last year, the average refund for folks who got one was about $2,860.
Assuming this holds true this year, even if you assume that you gave them that money at the very beginning of the year, you basically bought the government lunch. On January 4, the first trading day of 2016, the one-year Treasury rate was all of 0.61%. So loaning them that $2,860 should have gotten you all of $17.45.
This isn’t to say that you shouldn’t fix it. You should. There’s no reason to buy the IRS lunch (I’m sure most IRS examiners are very nice people, but still, no). You should keep that money for yourself.
But it’s important to keep everything in perspective. It’s really easy to get caught up in the visible minutiae – like making sure that you don’t get a tax refund – but forget about the stuff that really matters.
It may feel good to adjust your withholding, but it won’t get you meaningfully closer to the retirement that you want. What will get you there is building and maintaining your financial plan.
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