Posted on 10/04/2005 12:41:05 PM PDT by 2banana
Taxed beyond relief
Rising tazes, shrinking nest eggs and other surprises force some to make hard choices.
By Rita Giordano and Lini S. Kadaba
Inquirer Staff Writers
Third of four parts
To Art and Marian Arakelian, family was everything.
So three years ago, the retired engineer and his wife moved from Texas to a new active adult community in Sicklerville to be near their two sons and two little grandsons.
"We thought this was it," said Art, 68.
What they didn't know was how unforeseen financial setbacks, capped by escalating property taxes like those hitting many in Philadelphia's suburbs, can tear asunder even the most deliberate of retirement plans.
They didn't know that their IRA would take a big hit from a downturn in the stock market. They didn't know that Art would get sick and have to give up the part-time job that brought in extra cash.
Most of all, they didn't know that their property taxes would jump 34 percent - from $6,100 to $8,200 in just three years, with no sign of stopping there.
By the spring, Art began contemplating something he never imagined: leaving the kids and grandkids and moving away. His sons didn't want to hear of it. Marian, 61, teared up just talking about it.
Art wasn't seeing many other choices.
"I'm not a dreamer. I know prices of things are going to go up, but I never thought it would be like it is right now," Art said. "We made sacrifices so we could benefit in the future. I'm not sure what kind of benefits I'm going to reap right now."
•
Property taxes in Philadelphia's Pennsylvania suburbs have shot up 21 percent on average in the last five years - far more than the 3 percent in the city.
In New Jersey, with one of the highest property-tax rates in the nation, homeowners were hit even harder. Tax rates in Camden, Burlington and Gloucester Counties climbed an average of 23 percent.
No one tracks how many older people, faced with rising property taxes and other costs, give up their dreams of aging where they are - whether in longtime homes, condos they bought to be near grandchildren, or over-55 communities that seemed to offer it all.
But recent years have brought increasing tension between senior homeowners and suburban communities seeking tax hikes to benefit schools or make up for shortfalls in state and federal support.
Officials with the Pennsylvania and New Jersey AARPs say that existing tax-relief programs don't go nearly far enough.
"Property taxes are one of the main issues our members in Pennsylvania want government to help them with," said Angela Foreshaw, state AARP spokeswoman.
At least half of AARP's 1.3 million New Jersey members are on fixed incomes that have not kept up with tax increases, according to state president Marilyn Askin.
"Property taxes have risen more than 50 percent in the past 10 years, forcing seniors out of their homes or to make choices on whether to repair the roof or pay the taxes," Askin said.
One startling fact: Nearly 40 percent of the 65-plus homeowners in the suburbs live alone and must shoulder rising costs on their own.
At particular risk are those who spend at least 30 percent of their income on housing costs, including electricity and taxes. About 19 percent of the 470,000 people age 65 and older in the seven suburban counties are saddled with this burden.
Ruthann Wohlforth of Ocean View in Cape May County says her latest property tax bill was $3,478. Her annual income from Social Security disability checks and bonds is less than $8,000.
To pay her taxes, Wohlforth borrows money, expecting the state to reimburse part of it under its Property Tax Reimbursement Program, which allows some seniors and disabled people to freeze taxes but still requires that they first pay their full bill.
She also has applied for the Fair and Immediate Relief plan, which gives rebates regardless of age.
Although she has received partial refunds under the programs, she said, the amounts have fluctuated based on what the state can afford, leaving her uncertain year to year whether she can repay the loans.
"I am scared to death because I know if I can't pay back the loan, my house is gone," said Wohlforth, 63.
Levittown retirees Marie and Earl Wisler, 79 and 81, respectively, say their taxes have become such a drain that a few years ago they started charging friends for candy they make and used to give away.
"Everything we make from it, we keep aside for school taxes and real estate taxes, which keep going up," Marie Wisler said.
After a car accident put her on disability, Camden County real estate agent Jean Oberholtzer held on to her beloved four-bedroom home in Magnolia for as long as she could, even renting space to tenants.
Five years ago, property taxes shot to more than $3,500. She thought that she had to sell. An avid crafter who knits for charities, Oberholtzer, 67, now lives in Glendora in a subsidized senior apartment - "a big closet" - in which she can barely fit all her crafting supplies. The move "was horrible," she said.
"I lived in that house 371/2 years. I raised my kids there."
Helen Nolan, 68, a retired Social Security administrator, and her husband, Robert, 72, a retired printer, moved last year to Delaware, where property taxes are lower, from an over-55 community they loved in Mansfield Township, Burlington County.
Helen was president of the civic association, and they had good friends. Still, their vision of retirement included taking a trip now and then, and, Helen said, that wasn't going to happen paying the $7,000-plus in property taxes.
"We didn't want to leave," said Helen, a lifelong Jersey resident. "We really figured we would be there forever."
•
Art Arakelian thought he was on sure ground when he retired in 2001.
He had about $150,000 in an IRA, he said. The plan was to live on his Social Security income - about $1,500 a month after paying $260 for Medicare supplemental insurance - plus money from part-time jobs. Marian, long a homemaker, was working for Target. Art got a job at a Chick-fil-A.
For these frugal, modest, churchgoing people, it seemed to be enough.
But then their IRA lost about $40,000, Art said. In 2003, after they moved to New Jersey, Art got shingles and had to stop working. To pay their rising tax bills, they started spending their retirement fund. "How many years can you be living in the red?" he asked. "It's taking the funds I was planning on using to enjoy the rest of my life with my wife."
They gave up dreams of trips to Europe. Instead of eating out once a week, they go once a month. Instead of going to community theater, "we end up staying home and watching TV."
Art found that they were ineligible for the senior tax freeze program; they hadn't lived in the state for 10 years, nor in their home for three.
They did get about $1,200 back in each of the last two years from the FAIR tax-relief program, but their taxes continued to rise.
Reluctantly, Art began researching other places to live. What about a condo? one son asked. But Art figured that there would still be taxes and he didn't think he could get used to apartment living.
Florida's housing prices and taxes seemed reasonable, he thought, and the weather would be easier on his leg that was struck by polio as a child.
But the prospect of splitting up the family was painful for all the Arakelians, who have moved several times to be with each other.
Sons Jason, now 35, and Rich, 37, followed their parents to Texas after Art's job relocated him from New Hampshire 16 years ago. When Jason, a graphic designer, married a Jersey girl, the pull of family brought them all back East.
One evening in July, a still-undecided Marian began to cry as she talked about all the little things she would miss doing with her grandsons, Jay Jay, 5, and Joshua, 4.
"When you think about leaving the kids and the grandkids and my daughter-in-law, they're all my kids, it just tears you," Marian said.
"We'll always be up for any special occasion," Art told her, looking for a bright side.
"They won't be able to sleep over," Marian said.
Both sons said they would pay the taxes if they could. Rich, a computer programmer, recently had a big property tax hike. He ate sandwiches for a while and got a raise. He knows his father isn't getting any raises.
"My parents have worked all their lives, and they earned the right to be able to do whatever they want," Rich said, "and they can't - not here, anyway."
•
How the baby boom generation - the 78 million Americans born between 1946 and 1965 - will fare as their later years unfold is yet to be seen. Experts, though, are concerned.
A computer study by Temple University professor Jack VanDerhei, found that six out of 10 people will not have enough money for retirement.
Only 21 percent of American workers have traditional pensions, so many boomers will have to finance largely on their own what's expected to be unprecedented longevity.
"I think you've got a huge problem out there with individuals who have been handed the keys to their retirement future without an owner's manual," VanDerhei said.
Many boomers had children later and will be paying college costs at a time when past generations saved for retirement. Many will help pay for the care of their longer-living parents.
Most of those aged boomers will be women, who typically made less in their lifetimes. Many will find their savings sharply depleted by a husband's illness and death.
"It's this combination of forces at work that makes us skeptical about how prepared people will be for retirement," said Sandra Timmermann, director of MetLife's Mature Market Institute.
•
One evening in August, after they'd returned from Florida, Art and Marian sat together on the sofa of their tidy living room, discussing their hard-made decision with their sons.
They'd put a deposit down on a house in an active adult community in Lakeland. The brochures showed a pleasant-looking home. The cabinets were new; the porch sunny.
The mood in their South Jersey home was anything but.
"It's not going to be a gold mine down there," Jason said.
"If we come here as often as once a month, we'll still be ahead of the game," his father replied.
Rich mostly looked sad, toying with the heel of his sneaker. And Marian couldn't help crying when she recalled what little Jay Jay asked her just days before:
" 'Mom-Mom, why are you moving away from us?' "
--------------------------------------------------------------------------------
Contact staff writer Rita Giordano at 856-779-3841 or rgiordano@phillynews.com.
Funny how you don't mention where any of that tax money is going. The majority of property taxes are school taxes.
1. 2/3 of any school budget goes to teacher and administrator salaries and benefits. In the area I live, many teachers' are making close to $100,000/year for 180 days of work plus some of the best benefits in the country (salaries are even higher in some of the area you reported on). They pay nothing for health care and have pensions unheard of in the private sector.
2. The Teacher's Union. Whenever a district tries to at least hold the line on teacher's salaries or benefits, they are faced with a strike at the beginning of the school year. The teacher's know that they will not be replaced and that pressure from parent's work schedules will eventually bring the district to settle in their favor.
3. I am sorry that seniors are being forced out of their housing due to high taxes. Have they voted for candidates for lower taxes? Have they run themselves? Have they promoted any kind of alternatives? Have they done anything except suggest that someone else should pay for their share?
The basic equation is that outrageous pay and benefits (unseen in the private sector) for teachers and administrators backed by a powerful union and a state monopoly are forcing the higher taxes. This, in turn, is forcing seniors and working class families (especially with children) out of their homes.
Regards,
2banana
It is my understanding that in PA, school districts can (and often do) raise property taxes without voter approval. I won't live in such an environment.
Terrible people, wanting to keep their own money, how horrible.
I hope this is one more nail in the coffin for Rendell.
I AGREE 110% that taxes are rising TOO quickly. I also know that boomers are not saving and the "retirement" squeeze will effect them greatly.
Thank you. I skimmed the whole piece looking for just that. Assessors are coming over tonight to reassess my place (Sussex Cty, NJ.) We've been knocking down their school referendums like bowling pins. It looks like it's coming up for yet ANOTHER vote. We keep rejecting their requests for more money. hell, I don't even have kids.
I used to call on a buyer in Valley Forge, PA, who told me he also pays a payroll tax to Phily.
Sounds like they need to take a close look at California's Prop 13. That 1% yearly property tax cap is one of the few reasons why I still live in this state. The day the libbies succed in overturning it is the day I move out of this state forever.
Sounds like they could use a CA style Prop. 13 out there.
This is a good example of what happens when government has no restraints on tax increases.
How can you really "own" something if you must pay taxes on it? Aren't you really just "leasing" it from the gov.?
I guess I'm lucky, I have lived in my present home for 13 years and my taxes have gone up about 10% total.
And..AND?? So they aren't going to pay? Sounds to me that between three families they can cut back enough to pay for mom and dad to stay in Jersey.
I feel sorry for anyone who has to put-up with that tax system that raises your property taxes to match what your property supposedly appreciates year-after-year. What a scam.
My wife is a former elementary school teacher. We recently received a piece of mail from the Dems and Rendell touting the increases in education spending so Pennsylvania can have a world-class workforce.
My reaction is that Pennsylvania is 49th in job creation during this latest recovery. What do Democrats do? Raise taxes (income and property), increase education spending so Pennsylvania children can leave the state and work elsewhere.
They think businesses move to areas where the schools are good. I know that it is way down on the priority list. Businesses have no problem importing and relocating workers.
A home-grown educated workforce is not needed.
Why do they always say that??
As though folks under 65 have extra money hanging around??
We have one of the largest amt. of workers on the public payroll than any other state, 575 municipalities and over 600 school districts each with their own payroll in one of the smallest states , billions in debt, pension plans that were underfunded funded for 7 years, etc. it's just snowballing.
The one I love is the PA Lottery "benefitting our seniors" (*cough*cough*)
Sounds like the school district I live in
The teachers unions get everything they want ... including the kitchen sink
And if I recall ... shortly after Rendell left as Philly's Mayor .. the State had to come in and take over the city's school system because it was in such bad shape
Ping for further read
I haven't lived in Allegheny in a few years; do they still have that "fee"(tax) just to work in the county? I think I heard on kdka a while back that it was upped recently?
I was paying $20,000 a year in property taxes on two houses in NJ. Now I pay $400 a year for one house in PA. Nice big house with a yard, and better neighbors. Crime rate almost nil, and gun ownership is legal and normal.
Some folks just need to know they don't have to live in a particular place. I miss Jersey sometimes but I'm glad I left. There are better things to do with $19,600 than give it to the government.
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