Tom: Hi, Mellody!
Mellody: Good morning, Tom!
Tom: This morning you join us to talk about tax time saving, and a campaign to promote savings.
Mellody: You’ve got it, Tom. This morning, I want to talk about America Saves Week, an event that was created by America Saves, a coalition of more than 1,000 non-profit, government, and corporate groups to encourages individuals and families to save money and build personal wealth. This year, America Saves week falls right in the middle of our tax season – it runs all next week from February 22 through February 27 – with the aim of making people aware of a variety of ways they can add to their retirement and personal savings during tax time. America Saves and its partner organizations provide a lot of information and resources for people to help them save more!
Tom: How are Americans doing when it comes to savings right now?
Mellody: Last year was a year of progress when it came to Americans saving. According to a 2015 survey assessing household savings, 71% of Americans are spending less than their income and saving the difference, up from 68% in 2014. Fifty-two percent of people are saving at least 5% of their income, compared to 47% last year. And 78% of households had eliminated or were reducing their consumer debts, up from 76% in 2014. Many people were able to do this because of the improving labor market, which we talked about last week, lower energy prices, and good old fashioned financial planning. This is great progress, Tom, but there is more to be made!
Tom: That is for sure. What actions does America Saves week suggest to help people save during tax season?
Mellody: In terms of saving on or before April 15, the biggest emphasis is placed on saving your tax refunds. While we all dread collecting all of our paperwork and breaking out our calculators, it is important not forget the upside of getting back some of your own hard-earned money in the form of a tax refund. Saving a portion of your tax refund can be a big step toward meeting your savings goals.
By using IRS form 8888 for example, you can have your refunds direct deposited in your checking, savings or other account such as an individual retirement arrangement (IRA), MyRA account, health savings account (HSA), or a Coverdell Education Savings Account (ESA). And you can split it up! For example, a taxpayer expecting a refund of $400 may choose to deposit $150 into a checking account, $150 into a savings account, and $100 into an ira account. Taxpayers may choose the refund splitting option regardless of which form 1040 series tax form they file.