The money would still be available (plus interest) for that beach
vacation in the Spring. An even better investment would be to pay down any high
interest rate credit cards you may have. See our Debt Investment Calculator for a
demonstration of the return you obtain when paying down credit cards!
It really doesn't take a lot of calculations however to clearly
demonstrate with hard numbers that you can double or even
triple the financial impact of your over-withholding.
Simply paying down your credit card debt each month would likely
double or triple the impact of your refund. But, what about paying down your home
mortgage each month. More than 119 million tax refunds were
issued by the IRS last year for a whopping average of $2,902 per refund.
That refund would average out to almost $242 per month in over-withholding.
If that amount were instead applied toward your home mortgage payment each month,
the interest savings would amount to tens of thousands of dollars over the
life of the loan.
Of course, it must be pointed out that the additional $242 per month
in your paycheck can work similar financial magic in a 401(k) plan, insurance policy,
mutual fund, etc.
You have the right to adjust your withholding statement, Form W-4,
on a regular basis by informing your employer. If you are unsure about the
adjustment amount, please call our office. We can review your prior year return and
assist you in adjusting your withholdings for the remainder of 2011.