Q. I just learned I’m getting a $17,000 tax refund and now I have to decide what to do with the money. I already have an emergency fund and I fully fund a 401(k). I don’t need the money for anything specific. But with the stock market being what it is, I don’t think I want to invest it right now. Any ideas what should I do with my large tax refund?
— Happy
A. Let’s first talk about why you got a large refund in the first place.
You may like getting it.
But you just gave a large interest-free loan to the government.
Before we talk about what to do with the cash, your first move should be to adjust your withholdings at work, said Deva Panambur, a fee-only planner with Sarsi, LLC in West New York.
“By reducing your withholding, you’ll see more of that money in your paycheck rather than waiting until next spring to get it back,” he said.
Panambur said it’s good that you have an emergency fund and are maximizing your 401(k).
First, if you have any expensive debt, especially credit card debt, you could pay that off, he said.
“After that, if you have no near-term objectives, you will want to invest the money for the long term by creating a resilient portfolio based on your risk profile — your ability and willingness to tolerate volatility,” he said. “Portfolios can be made resilient and relatively reliable by diversifying appropriately and rebalancing periodically.”
Rebalancing ensures that after the market shifts, you aren’t carrying more risk than you intended, effectively allowing you to “sell high” and “buy low” and staying true to your long-term strategy, he said.
A tax-smart way to invest is in a Roth IRA account if possible, he said.
Contributing directly to a Roth IRA is limited by your income — under $168,000 for single filers and under $252,000 for joint filers in 2026.
“If your income is over the limit, you could contribute to a Roth indirectly by making a non-deductible contribution to an IRA and rolling it to a Roth IRA,” he said. “You could also do this in your 401(k) if the custodian allows it.”
Be aware there are many intricacies to this strategy, and it’s often wise to consult a fiduciary to ensure it’s executed correctly, he said.
This story was originally published in May 2026.