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Connie and I were out to dinner recently with two other couples – longtime friends.
During the conversation one of the wives asked the other if they had received their $1200 state property taxes rebate. Yes, we got it yesterday was the reply. Connie looked at me and asked if we received it. I tried to give her a visual high-sign, but she asked again. I said no. “I guess you forgot to apply, right? I was silent and tried another “look” to signal “cool it” on the conversation. Finally, there was a new topic.
On the way home in the car I asked Connie if she realized why we didn’t get the rebate check. You forgot to apply? No, because we are not eligible, our gross income was more than the limit allowed under the state plan. If the conversation had continued at the table, I may have had to say that as the reason were didn’t get a check and that would be embarrassing to all.
The thing is all three couples are similar ages, all of the men worked for large corporations with pensions and equity compensation. All three have two homes and/or rental property and we all lived in the same town for decades in modest houses. All our children went to school together. There was no reason to think retirement incomes were very different.
Actually, the incomes may not be that different. Given the eligibility cap amount is fixed, the income difference may only be a few dollars – kind of like the IRMAA cliff. I do know the only reason we went over the limit was our RMD, interest and dividends so we lost out on the $1200 … or did we?
The state has another program for seniors with an eligibility cap so high ($500,000) none of us come close. That refunds 50% of a seniors property tax bill up to $6,500 a year. But here’s the kicker. That $6,500 includes refunds from other state tax relief programs-including the $1,200. So, while we get $6,500 next year, the other couples receive $6,500 minus $1200. Makes you wonder why bother applying for the $1200.
Perhaps you are thinking, why do people earning $500,000 in retirement need or deserve a $6,500 tax rebate. I wonder too and would rather see more help for lower income people. The states logic is to keep higher earners living in the state. Then I have to ask, if I wanted to move to Florida and earned $500,000 or even $300,000 a year, would $6,500 keep me in place. I doubt it.
And there is more. Because the other couples itemize deductions, including property taxes, the rebates tied to those property taxes most likely makes them taxable income, whereas my $6,500 is not taxable because I don’t itemize.
There are lessons here. Don’t discuss money or taxes with friends. It may be a sticky wicket. And don’t attempt to figure out government tax logic either. 😎
Most of my acquaintances approach money discussions as if it were a hand of poker. They keep their cards close. None have apparent money issues, but might have some preferences which are beyond their means. Relocation, or expensive travel, for example.
Some of this is I think because of rigidity and wanting to be “right”. I broach a variety of money matter subjects but most prefer to avoid the topic. There is a modest amount of concern in the air, what with the S&P in the stratosphere. I can appreciate a desire to avoid the specter of a downturn.
I tend to keep discussions when they occur as general. I don’t make specific recommendations or opine about what’s better or potentially worse. If treasuries are discussed I have reminded friends of the I-Bond option. We tend to forget that they are available.
I do enjoy discussing alternatives as well as pros and cons. I’ve always found such discussions to be helpful when sorting out financial matters. Such discussions can be an aid to overcoming inertia. But interest being what it is, most discussions revolve around increasing resort fees, etc. I can only discuss this infrequently; it is like the weather. For example, for those living in manufactured homes there is a 10-year lease, and it stipulates annual resort fee increases of up to 5%. If I were to live in an RV, there is an annual site lease, and annual resort fee increases are usually up to 5%. (I haven’t researched the RV leases for a couple of years).
If I was really, really interested I’d go to the sales and rental office and talk to Steve. He’d give me all of the current information. But I’m not driven to do so, and my current lease has another 8 years. A lot can happen between now and then. With a lack of information there is a tendency to speculate in such discussions.
So, in fact, most money discussions are time fillers. For example, the “happy hour” group will sometimes stray into an area of interest. That happened recently and one of the group expressed a concern about taxes. The ball got tossed around for a few minutes. I went to my Android phone and pulled up the pertinent government website. I read aloud a short paragraph with the specific answer. One half of the couple with the question didn’t accept what I read and she began an argument.
At that point I stopped and decided to give that group a rest for a while. When I return I’ll be asked where I have been, and around the merry-go round we’ll go, yet again.
I wish I could have financial conversations with my wife, but she is “hands-off” with our financial stuff. I occasionally share financial information with my children, primarily that our income is greater than our expenses and that our travel bug is our way of spending down their inheritance. No specific figures. They both say “we don’t need your money”. I do have a “time’s up” document for wife and kids to access and manage the financial stuff.
Because those closest to me respond in those ways, I have no inclination to share financial info with friends. Will this change as I age???
I can relate. Connie is also hands off with money except for her checking account. She just has no interest. Although when she comes home after playing mahjong she is eager to tell me she won $1.25. I too have a final instruction letter.
I have told our four children they may have to help us at some point but it won’t be about money.
Three of our four will need our money for retirement because in their mid fifties two have young children years from college. One has a son in college and another close behind.
Illness and divorce have hampered their ability to save even though they work nearly every day with two jobs.
My old men’s Friday group is pretty frank about our finances, and we all know each other’s financial situation. We’re all pretty well-off, and we argue a lot about investing. However, no one has been convinced by anyone else’s argument – well, I may have pushed one guy to sell his position in BABA. It helps that there are no ladies present.
When you say frank, do you mean you know someone has $2,000,000 in investments and another retirement income of $230,000?
Yes, in some cases. I know one guy has $500K in a retirement account, and another guy has $125 million in stocks. Those are the two extremes. The guy with $500K has a very sizable pension.
P.S. I wouldn’t be saying any of this if I weren’t completely anonymous here!
I hope the guy with $125 million buys coffee😎
He buys the cake and supplies the coffee – it’s a $60 cake, too. I make the tea for the tea drinkers.
Maybe he’s asset rich but cash poor.
Perhaps, but just the dividends would buy a lot of coffee. With cake for that matter.
I tend to agree with the not discussing in detail with friends in a group setting. But it can be of benefit one on one to share if there is openness and willingness. You have to really judge the situation. I have shared many times, but have learned that it may be best to share an idea and then say to discuss with their financial advisor. People are more inclined to tell a financial advisor who is really just a stranger doing their job than sharing with a friend. It is kind of funny how that works but it is really tied to human emotions….how they might be judged etc.
Not sure what might be uworse, your friends learning you have more or you have less. I don’t think there is a win either way so best to keep it private IMO
I grew up without much, though my parents always lived within their means. Still, we were financially illiterate. We didn’t understand compounding or inflation, and I carried that discomfort with money well into adulthood.
Meanwhile, my childhood friend grew up in a wealthy family—serious, generational wealth, managed wisely. Yet they lived right alongside us in our middle-class neighborhood, and most people had no idea how rich they were. They weren’t modest because of culture or values—they were simply extremely stingy.
As adults, my friend and I ended up living in the same area again, and we both had successful careers. Funny enough, we each mirrored our upbringing: he struggled to spend and I struggled to understand money.
Over the years, we helped each other grow. I encouraged him to give himself permission to spend and enjoy life a bit, and he taught me—early on—how to build a financial foundation and get educated. It ended up being a great trade for both of us.
A good friend indeed!
It’s a shame that financial matters cannot be more openly discussed among acquaintances. They govern so much of our lives yet are so closeted. In the days before internet, and without a financial advisor, I quietly sought out others of like mind willing to speak generally and freely on such topics. That was both helpful and formative. Now, sites like Humble Dollar help fill the void.
The problem is if we knew how much or how little a friend or acquaintance had or earned it could taint our view of them and their lifestyle or even our relationship.
For example, a friend complains loudly about their property taxes even though they are $100 lower than yours and you sympathize with them, but then you learn their income is 20% higher than yours and they have $2 million in investments.
What would you then think of them?
I agree that keeping asset amounts private is important. I’ve never wanted to learn how much someone else has accumulated. That still leaves open much room for constructive discussions of financial strategies and investment possibilities with others. Discussions with complainers tend to be non-productive and I try to avoid them.
“Discussions with complainers tend to be non-productive and I try to avoid them.”
more good advice
I agree as long as personal finances and numbers are not part of the discussion.
What makes you be so absolute on this? Sure jealously on either side can taint the relationship but if it’s a true friendship with trust (and lack of judgemental behaviour) on both sides isn’t there something to be gained by some openness?
Maybe not at your stage of life when you and your peers are sitting comfortable and the only real decisions are matters of inheritance etc. But for those in the grunt years of 40-60, particularly with defined benefit pensions disappearing there are considerable strategies to share/discuss re kids’ education, retirement saving, the question of how and when to set a finish line etc.
I’ve found it enormously helpful in a world of DC pension pots to read case studies of what other people have accumulated and their plans for when they retire. None of us really want to be the outlier of having saved too little or indeed too much for our desired lifestyle. So there is benefit to knowing where you fit in the pack. What a gift it is to be able to help a friend conclude that they have enough and make plans for the next phase of their life or help them take the steps they need to break some financial bad habits.
Knowing where you stand in the pack, I agree, but you don’t need to make it personal to do that.
Have to disagree with you and bbbobbins on this one. I see no practical value to knowing where we fit in the pack. What’s important is whether we have enough for our own goals, not how we compare to others.
I agree. I really don’t care about the size of someone else’s portfolio; it has absolutely no impact on my life. A very long time ago, when I was an employee, it would have been handy to know my colleague’s pay package to ascertain if I was getting a fair deal. But in retirement, I’ve made my choices and left the building.
I think that your particular lens is important here. When you’ve left the building there is no point in agonising whether a better seat might have given you a better view.
But in getting there it’s useful to benchmark in some way what others consider is enough and upweight/downweight them for your lifestyle factors vs theirs.
Not the least because if, say, you’re planning on a very lean retirement but everyone you know is planning something much fatter then that hints at some divergence in how much you’ll be able to do together in the future. Or indeed vice versa.
I don’t see much value in knowing or caring exactly where you place in a pack. In fact that might just lead to misery. But knowing you’re not at the extremes can be fairly useful in making decisions (the wisdom of crowds and all that).
Practical? Probably not, but it’s nice to know how you did or how you are doing. I admit to finding satisfaction in that which I keep mostly to myself.
I’m sure there are exceptions, but generally good advice.
Like many things, it depends. Over the years, many friends I worked with shared their key financial numbers with me: 401(k) balances, pension numbers, things like that. Sometimes they were doing better than me, other times I was in better shape. My purpose was not to compare but to help them out. At times, I would share some of my numbers with them. Since we were (almost) all roughly in the same ballpark financially due to our common profession, I felt less hesitation being open than I might be with my friends in very different lines of work.
In my job I had access to all the salaries, other forms of compensation, 401k balances and pension amounts in the corporation top to bottom.
Sometimes I would hear people talking about their money matters and that of others. Sometimes complaining what they or someone else was paid, how they would retire at 55, the amazing things they had accomplished in their 401k, etc.
I would listen, keep my mouth shut and think. What are they talking about? On occasion I would be asked what so and so earned- no way.
One time when looking at 401k balances I found a person with nearly two million dollars, not an exec, but someone with huge energy trading floor bonuses, but $2 million? Then he got divorced and half went to the ex wife. Within not too many months his balance was $2 million again. He had found a way to trade every day between US and foreign markets and the GIC fund.
I always wished I had been that clever- darn engineers 😁
Obviously, I always kept any financial information shared with me confidential. But one time an admin inadvertently sent out a spreadsheet containing the salaries of most of the engineers at my site to everyone in the department. Have to admit I peeked, and there were some surprises.
Thanks Dick. Two thoughts.
Firstly, I’m no expert in the Australian tax system and know basically zero about the US system. But when I read discussion about tax in the US on Humble Dollar, the layers of complexity makes my head spin.
Secondly, there are many of us on HD that have saved and invested enough to spend more freely, but choose to remain very restrained and simple with our purchases. I think that one reason (among others) might be to avoid creating any sense of being in a different financial position to those we work or socialise with.
I think you are right on both counts.
They send out tax rebate checks because they purposely over-tax us. And I notice they send them out right before election time. In NYS, Hochul (with a big smile on her face) called them “Inflation Relief checks.” It’s a game they play thinking we are fools – they give us a bit of our own money back, but act like they are really caring and looking out for us.
Rebate check? Is this different from a refund for overpayment, because if so I’ve never heard of one.
I’m not sure about that as many states are running deficits (not in the same sense as the federal government though) too-and several have underfund their pension systems.
I can imagine myself reacting the same as you in that situation.
I’m most always open to providing solicited advice or opinions about finances. I rarely provide specifics to friends regarding our finances.
As you stated, there are a few situations where it makes more sense to claim the standard deduction. For example, I had several tax clients begin using Qualified Charitable Distributions in order to take advantage of larger standard deduction. QCDs also reduce some state’s income tax liability.
My wife Suzie and I are close friends with someone who worked for me for nearly twenty years. She was my right-hand woman in business and remains a dear friend—she’s still Suzie’s holiday companion and joins us for dinner regularly. I always paid her well, but as the business founder, I was naturally the higher earner during those years.
Since my retirement, she’s moved on from the company (the new culture wasn’t for her) and stepped into a bigger role at a larger organization. Her compensation package has increased accordingly, and she now definitely has more disposable income than I do.
This has become a source of constant amusement and banter between us, but ultimately, it doesn’t matter. When you have a long friendship built on deep shared history, a financial reversal is nothing more than an excuse for silly jokes. Last week I wouldn’t let her come for dinner unless she bought dessert and wine…she’s more money than me lol
I don’t really agree about making it an absolute rule. If it wasn’t for some basic discussion of money matters I wouldn’t be helping my sister in law get a bit more proactive and efficient with her retirement savings plans nor nudging my brother to fill up his allowances each year.
Friends it is harder, because we all have different circumstances and strategies, but having walked the walk on retirement planning for the past 6+ years I feel that I have some valuable insights and perspectives to at least help those earlier in the journey or to provide support or affirmation to those at my stage. We’re not talking about bragging or lamenting pot values but ways to approach the philosophical aspects of what is enough and the mechanics of drawdown strategies.
None of it is perfect or easy. I know people who are plainly ready to retire and I suspect probably have “enough” but for the cost of adult kids still (partially) on the domestic payroll. But you can hardly say to them cut your kids loose because you’re not in their priorities and relationships.
I think there’s still a lot of mystery around retirement. Many of us might look at those who retired early and think “lucky” or wonder how they managed it. At the same time we can’t help but compare to generational peers and get a bit unsettled if we seem to be in the later cohort. A little bit more openness about what others decide is “enough” can be a help to many, at least in providing peace of mind.
Similar slippery slope with the new tax breaks in Trump’s tax act. We will not qualify next year for either the $6K senior deduction or any relief from the expansion of the SALT cap (because my husband is still working and our income is too high). We bite our tongues if people who admire the president say things about it.
Property taxes, on the other hand…our property tax liability is already reduced by almost 50% because we’re over 55, and now that we’re 65, we can apply for an exemption to several of the school bond taxes. I just submitted the application for the 26-27 property tax year, and it will save us another $2K. None of that is tied to retirement income, though.
“Property taxes, on the other hand…our property tax liability is already reduced by almost 50% because we’re over 55…” Don’t you live in CA? I must be missing something here because I don’t know of any such programs in the golden state.
Yes, this goes back to Prop 13 in 1978, followed by subsequent propositions over the years, designed to ensure that people weren’t taxed out of their homes as property values increased. For folks over 55, if you sell your home and buy another, your property tax basis moves with you. In our case, our previous home was purchased in 1998 before home prices really took off. Even though the value of our home tripled in the 20+ years we owned it, there was a cap on how quickly the property tax basis could increase. When we sold our home and moved to a new place in 2019, we filed paperwork with the county to transfer our previous property tax basis to our new home. I just looked at our property tax bill the other day, and the discount we get from this adjustment is nearly 50% of our annual tax bill.
“people weren’t taxed out of their homes as property values increased”
That is the great misconception many even most people hold. Property taxes don’t go up because of increasing values. They only go up if the spending of the community goes up.
If a house is reevaluated and the appraised value increases, unless the intent is to raise revenue, the tax rate is adjusted downward so the net tax due is neutral.
in other words, if my house value goes from $200,000 to $400,000 , tax rate per $1,000 might go from from $2.00 to $1.00. Now if the town budget goes up, the $1.00 may be raised to $1.05.
Ah, Proposition 19. I see the logic now. Thanks!
You can definitely criticize other taxes in CA (income, sales), but property tax isn’t that bad. Our monthly hit right now is $635.
what state are you in? in Vermont are property taxes are crazy and there is no senior discount of any kind. It’s mostly education tax.
California
In NH property taxes are extremely high. In the town we moved out of in preparation for retirement the total rate was near $30/K, the town we moved into it was $19/K. The tax rate was a significant, but not the only consideration when we decided to move (another was the distance/time to the beach). We built a more expensive house and cut our property taxes by 1/3. To this day or taxes have not reached the previous total tax and our house has nearly doubled in value. No refund of any portion of the tax unless you are a veteran, or very low income. Both amounts are determined by individual towns.
Not sure I understand the $30k reference. Are you saying your property taxes were $30k a year?
If that is the case, think of us in NJ I’d love the NH rates.
effective property tax rates (i.e., property taxes paid as a percentage of home value):
Interesting. You can separate your property tax reduction unique to schools? I wonder what that does to school funding if there is a large number of 65 + in a community? Nearly 60% of our property taxes go toward local schools.
There were two school bond measures that passed in 2020 and 2024 that include exemptions for seniors 65+. I think those exemptions help the measures to pass. Each of the exemptions is worth $1000/year off your total property tax bill.
I’m sure the exemptions do make school funding more of a challenge, but there are a lot of existing bond measures without exemptions. In a college town, spending on schools is usually popular.
I prefer to keep such private matters private, and only discuss financial details with professionals.
An excellent book I read a few years ago was “The Righteous Mind” by Jonathan Haidt. The subtitle was “How Good People are Divided by Politics and Religion.” Seems to me that today too many forget the “Good” when criticizing those with whom they disagree. I highly recommend this book to the Humble Dollar community.
Hi Jack, I would second your recommendation of that book. I sometimes used the ideas in the book to help my class discuss difficult ethical and religious issues.
When it comes to discussion financial matters with friends, I struggle with the proper balance between privacy and learning from others so that I can be a better steward.