Tips for Financial Health During Pandemic-Year Tax Season
Wednesday, April 14, 2021
LITTLE ROCK, Ark. - The IRS has extended the income-tax filing deadline by an extra month, and experts say while the pandemic has shaken retirement planning for many families, tax season is a good time to get back on track.
Households should be reviewing finances and investing for the long term, said Sarah Holden, senior director of retirement and investor research for the Investment Company Institute.
"I think really, the past year has given us a chance to step back and take a look at our financial picture," she said. "There have been some rocks in the road, so we kind of need to dust ourselves off and get back on the path of saving for our long-term goals."
Eighty-two percent of Americans reported that the pandemic has affected their retirement plans, according to a poll released this year by Fidelity Investments. About one-third of people surveyed estimate it'll take two to three years for them to get back on track.
Holden said it is possible for people with Individual Retirement Accounts to make contributions up until the tax-filing deadline - which this year, is May 21 - and count those contributions as if they occurred in 2020. She said money in IRA accounts grows and compounds tax-free.
"And if you are able to make a deductible contribution to a traditional IRA," she said, "you could actually reduce last year's tax bill."
Holden also pointed out that stimulus checks offer an opportunity to invest and save money on those investment earnings.
"What works for most investors is to get in little by little, paycheck by paycheck, for the long haul," she said, "and that's how you compound and build that nest egg."
A survey last summer found that one-third of American households planned to use the first round of stimulus checks to first pay bills and then save.
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