Tuesday, December 22, 2009

Something NOT to Do: Turn Your Tax Refund into a Savings Bond

From MSN Money.

Why, you ask? I covered this before in this article. The government has already had your money interest-free for a year, and now they want to tie it up for another 17 years with a mere pittance of interest? Please! Now is precisely NOT the time to be buying bonds...but that's the point: nobody else is buying our bonds (especially foreign governments), so Obama is using his salesman's charm to sell some to unsuspecting people.

This is government fund raising in action. You can invest YOUR OWN money and make way more in returns--right now, TIPS are paying out 12%, and all the major indexes are paying returns in the mid-to-high 20's. You can sell and take your profit ANY TIME as well, or if you choose, plow it all into your retirement account and let YOURSELF prosper from the future higher returns and tax deferral.

Even if it IS for the kids, you can get an auto-deduct program directly from the Treasury and buy a bond a month for them (if that's your preference), or here's a more effective way of saving for kids: open up a 529 plan and have it invest in the Dow or S&P indexes--$100/month, rain or shine, and your eventually college-bound kid will be a millionaire (or well on his/her way) if you do this soon after birth.

UPDATE: If you have credit card, loan, or mortgage debt, paying that off with your tax return would yield you more for your money than the measly 3% or so offered at the end of 17 years (plus 1 that they've already used). If you have no debt, then use it to stock your pantry/larder/cupboards with food and supplies for at least a year--Glenn Beck has even gone so far as to add clothing, car parts/maintenance items, tools, and hardware supplies you might need for the next few years. I say don't bother to stock up on items you can readily get at a yard sale or thrift store.


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