What People Will Do With Tax Refunds

April 14, 2014 (PLANSPONSOR.com) – More investors are planning to spend their federal income tax refund on a vacation, says a new survey.

The Investor Sentiment Survey from John Hancock Financial Services finds that half of respondents expect to receive a 2013 federal refund, with 17% planning to spend it quickly and 56% earmarking their return for a vacation. The survey authors note this is a significant increase compared with first quarter 2013, when only 36% planned to finance a vacation with their federal refund.

For other refund spenders, 13% plan to treat themselves to a luxury item, which is up from 9% in 2013, and 14% plan to spend the funds on entertainment, down from 17% last year. Other spending priorities include basic household needs (23%) and financing a big ticket item (9%).

Of those who aren’t spending their refund check, 63% say they will put the money into a savings account. More than a quarter (29%) will pay down debt. A very small share (4%) will contribute their refund to their employer-sponsored retirement plan, while 19% will invest it outside of an employer-sponsored retirement plan.

Not everyone expects to get money back from the federal government. Thirty-one percent of respondents say they expect to owe taxes.

The survey was conducted online by independent research firm Greenwald & Associates on behalf of John Hancock. A total of 1,028 investors were surveyed from February 10 to 24. Respondents were required to participate at least to some extent in their household’s financial decision-making process, have a household income of at least $75,000 and assets of $100,000 or more.

John Hancock Financial is a division of Manulife Financial, a Canada-based financial services group with principal operations in Asia, Canada and the United States. John Hancock offers and administers a broad range of financial products, including life insurance, annuities, investments, 401(k) plans, long-term care insurance, college savings and other forms of business insurance. Additional information about John Hancock may be found at www.johnhancock.com.