This Tax Season, Lincoln Financial Shares Latest Tax Trend Research and Expert Tips for Maximizing Returns

Tax season is in full swing in the U.S., with many Americans looking forward to their potential tax refunds. With 50% of U.S. adults expecting to receive a tax refund this year, Lincoln Financial Group (NYSE: LNC) conducted a comprehensive survey to explore how they plan to allocate their tax refunds¹ to help guide informed financial decisions with long-term goals and needs in mind. According to the survey data, the top two priorities for Americans are saving for emergencies and paying down debt.¹ On the other hand, one of the less common ways that individuals are using their tax refunds is by saving for retirement.¹

“While it’s tempting to splurge on short-term indulgences when that refund comes, it’s crucial to consider long-term financial goals. Lincoln Financial supports customers in making informed decisions and encourages them to prioritize financial wellness by considering options like saving for emergencies, paying down debt and investing in retirement,” says Aaron Moore, senior vice president, Retirement Plan Services Institutional Sales & Client Engagement at Lincoln Financial Group. “By taking a proactive approach to managing tax refunds, individuals can lay the groundwork for a more secure financial future.”

Saving for emergencies

The survey found that the most prevalent approach among U.S. adults for spending tax refunds is to put the money into a savings account for emergencies or unforeseen expenses. In fact, 40% of U.S. adults reported that they would be allocating their tax refunds to a savings account.¹ Putting money into an emergency savings fund can reinforce financial safety, especially during times of uncertainty.

Paying down debt

Many Americans surveyed, particularly Millennial respondents (47%), plan to use their tax refunds to reduce debt burdens.¹ When using a tax refund to pay down debt, individuals can go beyond the usual monthly payment and designate an amount that exceeds the minimum requirement. Debts with high interest rates should be prioritized, as paying off these debts first can lessen interest payments over time.

Additionally, those paying down debt can explore online budgeting tools that provide insights on how to allocate tax refunds. For example, Lincoln Financial offers a debt calculator for those on the path to debt repayment. This debt calculator allows individuals to model repaying a debt in a specific timeframe or repaying a set amount.

Americans should seek advice from a financial professional to best determine how tax refunds can be applied to a reasonable repayment plan.

Save for retirement

Only 13% of surveyed Americans plan to put their tax refunds towards their retirement savings, despite maximizing retirement contributions being a sound decision for long-term financial wellness.

Although tax returns can’t directly be contributed to employer-sponsored 401(k)s, Americans can temporarily increase their contributions and leverage their tax returns to compensate for those additional dollars being designated for retirement. This strategy allows individuals to boost their retirement savings and benefit from the tax advantages associated with contributing to a 401(k) plan throughout the year.

Additionally, it’s important to note the available Saver’s Credit through the Internal Revenue Service, which provides a tax credit for eligible individuals contributing to an IRA or employer-sponsored retirement plan. This credit can help reduce tax liability and further incentivize retirement savings.

During this tax season, Lincoln Financial remains committed to empowering individuals with the knowledge needed to make informed financial decisions with their tax refunds. By prioritizing emergency savings, debt repayment, and retirement planning, Americans can embark on the journey towards a brighter financial future.

¹ Lincoln Financial, Consumer Sentiment Tracker, November 2023

About Lincoln Financial Group

Lincoln Financial Group helps people to plan, protect and retire with confidence. As of December 31, 2023, approximately 17 million customers trust our guidance and solutions across four core businesses — annuities, life insurance, group protection, and retirement plan services. As of December 31, 2023, the company had $295 billion in end-of-period account balances, net of reinsurance. Headquartered in Radnor, Pa., Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE: LNC) and its affiliates. Learn more at LincolnFinancial.com.

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Ayanna Maxwell, Corporate Communications
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