This can be one of the best investments you make all year long.
If you’ve received a tax refund, or are due for one in the next few weeks, you probably already have some idea of what you want to do with the money. You can also use it to pay off debt or make that big purchase you’ve been thinking about. Or, if you don’t need the money right away, you can invest it.
When you keep your tax refund in a retirement account, you give up access to that account until you are at least age 59 1/2. But instead, that money will grow and you will benefit from the taxes associated with that account.
Here we take a closer look at how much your average tax refund will be by the time you retire.
The average tax refund is $2,476
As of February 13, 2026, the average tax refund is $2,476. This is up from $2,169 at the same time last year. Of course, the amount of your refund will vary depending on your income, filing status, and any applicable tax deductions or credits.
This table shows how much your $2,476 refund will be at age 65, depending on your current age and various rates of return.
There’s a lot of variation here, but even if you’re only a few years away from retirement, you could end up with a significant return. And if you’re in your 20s or 30s, that one tax refund could potentially cover more than a year of retirement when combined with Social Security.
Where you put your refund matters
If you’re making a one-time contribution to a retirement account, an IRA is a good choice. You can save in a traditional or Roth account, which affects when you pay taxes on your money.
With a traditional IRA, you get a tax break in the year you make your contributions. Therefore, if you invest $2,476 in an IRA, your taxable income in 2026 will decrease by $2,476. This will save you money when you file your taxes next year. The downside is that you’ll have to pay regular income taxes when you withdraw the funds in retirement.
If you want to withdraw money tax-free in retirement, a Roth IRA is a better option. You pay taxes on contributions to this account, but once you’re 59 1/2 and have had a Roth account for at least five years, the government won’t count your withdrawals as taxable income.
However, some high-income earners are unable to contribute directly to a Roth IRA. If you fall into this group, you may want to consider running a backdoor Roth IRA. You will reach the same place, but you will have to jump through a few more hoops.
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