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A relative couple of mine is living close to the bone. I’m not sure exactly why as they have two pensions (one military with COLA) plus Social Security and no mortgage. Even their property taxes are cut in half with subsidies. He had a good paying union job with good benefits his entire working life. Nevertheless, they seem to be scraping by. Both are in their 70s.
I recently learned they don’t have any income tax withheld from pensions or Social Security, don’t file estimated taxes, but rather wait until year-end and take what they owe in taxes from a money market fund. They claim they can’t pay their bills if they have tax withheld.
I pointed out that they were risking fines by underpaying taxes. I suggested they check with the person who does their taxes, a CPA who happens to be their daughter. She agreed with me, but when I suggested a different way such as using withholding, but then as needed take money from the money market throughout the year, the idea was simply dismissed because they liked what they were doing.
This month they needed to replace their car. They bought a used car with 30,000 miles and took the cash from their money market thereby further depleting limited resources. I suggested since they only drive around town maybe a low mileage lease would be better. That idea was rebuffed.
I have known this couple my entire life. They have experienced incredible personal hardship and tragedy. Their financial literacy is minimal. They are set in their ways, good or bad. Their situation bothers me, but my suggestions, even modest offers to help them are rejected.
The routine they have come to accept may be making life more difficult. I wonder how many other retired seniors maybe doing the same.
I think the refusal to accept advice about finances is a combination of inertia and fear. Fear, because if they have little financial literacy they may be afraid of making a mistake and suffering consequences worse than their current situation. The other element could be embarrassment at having to rely on someone, even their daughter, for help with something as simple as making estimated tax payments. They’ve built a life that seems to suit them, after years of caregiving (if this is the couple you’ve described in a previous article), and I think the best we can all do is, when faced with similar situations, is to show our love by the time spent together.
Probably good advice.
Generally people don’t like advice unless they ask for it and even then it’s up to them to take it or not!
I appreciate other people‘s advice. Of course I don’t always take it, but I still enjoy getting it. That’s one of the reasons why I am here at humble dollar.
I appreciate Dick’s concern, but many people are set in their ways and unwilling to change, even though it is a better approach.
I rarely offer unsolicited advice, but when I do, it usually falls on deaf ears.
Always easier to weed someone else’s garden. I think the message you are getting is, “MYOB”.
There’s certainly a time to mind one’s own business, and for me, that’s the case more often than not, by far!
But I don’t think that’s the message to be taken from most of the comments. The recipient of the advice isn’t just some random work colleague, it’s a relative Dick cares about, and I personally don’t find his advice on this point to be very intrusive. Of course if they don’t take it, I wouldn’t keep beating the drum, but I don’t criticize the offering of it.
I can see where they wouldn’t want to lease a car. And, maybe they have more resources than you know about? And wow about the $12k in property taxes. Chris
Property taxes on my condo less then a mile from their house are now $14,000 a year.
Sounds like another living beyond your means discussion.
I think the central message here relates to all age groups – it is easy to observe someone else’s situation and see a better approach, but it is never as simple as just telling them!
A young man I work with spends many, many thousands of dollars on motor vehicles, boats and other paraphernalia, then tries to make a few extra dollars by buying and selling second hand stuff on Facebook Marketplace. The obvious answer is to spend less on all his toys, but he doesn’t want to hear it, and it won’t work.
I hope he works it out, but a lecture from a grizzly old man like me is highly unlikely to change his ways.
I can almost guarantee they are paying at least a small penalty, and I have heard exactly the same thing from clients when I suggested estimates. Some people just stiffen their backs at un-asked-for advice. Like Doug C below, I have learned to stay quiet, unless asked.
Looking at the title of the post, I’d suggest that many seniors exhibit certain eccentricities that do make life more difficult.
Using an adult child to do taxes and provide tax advice is not a good approach in my opinion. Children often have difficulty corralling willful parents. I’m speaking from experience.
Although I have a hard time following this guidance myself, most of the time it is better not to offer advice (especially to adults) unless you are first asked for it.
I wondered this, also, Doug, if they had asked for advice. Chris
I’m curious. Why would a lease be better than a reasonably priced, good-condition, secondhand car?
Only because they would not be putting out a big chunk of cash from limited resources and would have a modest payment.
In order to do a full financial plan for this couple, we would need the real numbers. How much is each pension, how much is social security, what are their basic living expenses? It sounds like there should be plenty of money, but we are helpless without the numbers.
I don’t know exact figures, but all combined income is between $60-70K gross. Property taxes are about $12,000. Sounds pretty adequate even in a high cost of living state.
At the Goodwill tax prep, I’ve done a lot of taxes for people in that range. I’ll bet they don’t owe a lot. Think about it — they get the standard deduction for married over 65, and each qualifies for the extra $6000. So they’re probably paying g taxes on the little remaining. I doubt they’re risking a major penalty.
You’re right, not a lot. I put their situation in an AI and it estimated roughly $2700 based on taxable $70,000 which is probably overstated because it includes all SS.
That is a sad story, especially knowing that they’ve experienced significant personal tragedy. Your tax withholding recommendation seems so obviously correct, especially since it costs nothing – withheld monthly or paid annually, the total tax is what it is – and especially since their present method risks consequences. (The car advice is more debatable, but the tax advice is a no brainer – imho of course.)
It’s amazing and a little annoying to read that their daughter who is a CPA and knows better doesn’t find it worthwhile to advise a simple change like withholding. I guess we have to allow that she knows her parents. Certainly there are things my own parents do that I wouldn’t, and I will weigh in on some, but not others. Then again they’re not on this scale of obviousness and potential consequence.
I was disappointed the daughter didn’t push for a change. I spoke with her, but she seemed unconcerned.
Technically some withhholding is right, but the daughter is also correct in not forcing the issue and risking a relationship breach. The money involved here just isn’t worth the fight.
True that
Agree, Marilyn Chris