Recent research from Intuit/TurboTax has placed a spotlight on a long-standing trend: retirees often celebrate tax refunds as if they were unexpected bonuses. While these funds may technically be overpayments returned by the IRS, retirees frequently view them as “found money” they’ve rightfully earned. Let’s explore why refunds resonate so strongly with retirees, how financial advisors can guide clients toward prudent use of these funds, and what steps can help ensure that every dollar supports long-term well-being.
Year-Round Strategies for Long-Term Benefits
A critical part of helping retirees maximize their refunds involves ongoing cash-flow and tax planning. By monitoring estimated payments, withholding levels, and overall spending throughout the year, advisors can position clients to avoid large tax surprises while maintaining stable monthly budgets. This proactive approach ensures that refunds—if they arise—are a manageable part of a broader financial strategy rather than a one-time windfall. Advisors also collaborate with tax professionals to stay on top of changing regulations and to fine-tune each client’s plan, aiming to enhance both short-term satisfaction and long-term security.
Whose Money Is It Anyway?
Though retirees often see their refunds as windfalls, the reality is that it’s money they overpaid throughout the year. Matt Fitzsimmons, Chief Operating Officer and Senior Wealth Manager at The Watchman Group in Plano, Texas, underscores the importance of recognizing this fact.
“Many use their refunds to pay down debt, boost savings, or take trips,” he says. “While those are all solid choices, thinking strategically can make that refund work even harder. Before spending, consider if it could strengthen your long-term financial security, like padding an emergency fund or setting aside money for future medical expenses.”
Fitzsimmons also highlights the value of adjusting tax withholding. A big refund might indicate that retirees had less month-to-month cash flow than they could have. “Retirement is all about balance—enjoying the present while making sure your money lasts,” he adds. “A tax refund is a great opportunity to do both.”
Why Retirees Love Tax Refunds
For many older clients, tax refunds are a cherished part of the annual financial cycle. Hunter Lord, a second-generation financial advisor at Essential Planning in Portsmouth, New Hampshire, observes, “Clients generally love receiving refunds, and we help them manage their expectations because there’s certainly an attitude of ‘I’ve worked hard, I’ve paid taxes, and I deserve a nice refund.’”
Lord notes that some retirees view a refund as a “gift from the government,” reflecting a sentimental attachment formed over years of filing. He acknowledges that large refunds act as interest-free loans to the government but finds that balancing emotional satisfaction with practical financial sense is key. By coordinating with local CPAs, Lord’s team strives to ensure clients receive a modest but meaningful refund while minimizing overall tax liabilities and managing cash flow.
Retiree Tax Refund Trends and Tips
Despite the steady state filing of April 15th every year, there are twists and turns in getting Americans to file on time. “This year the news cycle is driving some people to delay filing taxes because of confusion,” says Lisa Greene-Lewis, CPA, tax expert, and spokesperson for Intuit TurboTax and Credit Karma. “I think many are holding off due to ongoing tax policy conversations. People are hearing rumors like no taxes on tips or Social Security earnings, and it’s causing uncertainty.”
According to a recent TurboTax survey, 27% of baby boomers mistakenly believe they don’t need to file taxes—and thus cannot receive a refund—if their income falls under the IRS threshold for filing. This misconception can prevent many from claiming money they’re rightfully owed.
Greene-Lewis also notes that 90% of taxpayers now take the standard deduction, a shift that followed the 2017 tax reform. “Those provisions are for 2018 through 2025. We’re waiting to see what will happen,” she says.
She adds that 40 million people file with TurboTax each year, and 11 million manage to file for free.
Beyond giving Uncle Sam a loan there a several tax credits and deductions that retirees might miss.
Often-Overlooked Tax Credits
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Earned Income Tax Credit (EITC): While most retirees do not qualify, those who do can easily overlook it. The IRS estimates one in five people miss out on the EITC.
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Retirement Saver’s Credit: Worth up to $1,000 ($2,000 if married filing jointly) for mid- and low-income taxpayers contributing to a retirement account. Again, the IRS reports that many eligible taxpayers fail to claim this credit.
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Student loan interest deduction: Retirees who co-signed educational loans for kids or grandkids may be able to itemize this deduction since the loan is in their name.
Business as Usual at the IRS
Despite swirling headlines about potential IRS layoffs or legislative changes, the 2024 tax filing process remains unaffected by any new laws. Recent proposals from the Trump Administration have not passed, so advisors can reassure clients there’s no impact on this year’s returns.
A possible government shutdown was averted on March 14, 2025, when a six-month funding bill passed. As of March 7, 2025, IRS filing statistics show that refunds are up 5.7% over last year, averaging $3,324. For the latest on individual returns, the IRS “Where’s My Refund?” tool remains the most reliable source of personalized information.
Finding Balance: Practical vs Long-Term Strategies
“Our clients are smart, and they understand both the logical and emotional side of refunds,” says John Gillick, a financial advisor at Financial Council in Towson, Maryland. “They understand that they’re effectively giving the government a loan, but they still enjoy the feeling of receiving a refund.”
Gillick works with several clients who take a “bookmarking” approach, earmarking refunds for specific expenses such as home repairs or paying down a mortgage. “We work with clients to incorporate refunds into their overall financial plan and ensure the cash flow and expense numbers align,” adds Gillick.
For example, on Financial Council client puts their refund toward an annual summer vacation fund. “They appreciate the fact that they don’t have to tap into their nest egg to travel and have fun with the family,” he explains. “While it may not always make perfect logical sense, people often prefer to receive refunds or do things like pay off mortgages early simply because it provides an emotional lift.”
Yehuda Tropper, CEO of Beca Life Settlements, has worked with seniors for over 20 years and has observed that many view refunds as “found money” rather than delayed returns of their own funds. “What they put their refunds toward varies from healthcare costs and home repairs to travel, hobbies, and small luxuries they’ve postponed,” Tropper explains. “Grandchildren’s education is also a significant bucket, and some retirees give portions to adult children.”
He suggests a balanced approach that includes building retirement savings and fulfilling personal goals. “It’s a good idea to look at putting this money into retirement accounts like 401(k)s, and then spreading the rest over several categories,” says Tropper. “That way, retirees can address urgent needs, help family members, and still grow their nest egg.”
Refund Management, Cash Flow, and Side Hustles
Tax refund amounts for retirees can range from a few hundred to several thousand dollars, notes Hunter Lord of Essential Planning. In today’s market climate, many of his clients prefer to keep refunds in high-yield savings accounts, especially given ongoing volatility and geopolitical concerns. “We’re seeing more retirees who want to maintain at least three to six months of living expenses in cash,” says Lord. “About 80% of the refunds we see end up in high-yield accounts.”
At the same time, some retirees are supplementing their income with side hustles—such as selling crafts online, trading used boats, or even working part-time. While these activities can help diversify income streams and keep retirees engaged, they also introduce new tax considerations. “We coach clients to account for all income sources—whether from 401(k) distributions or side gigs—and treat taxes as a separate line item in their budgets,” explains Lord. “This approach ensures retirees remain aware of how extra earnings might affect their overall cash flow and tax liabilities.”
By thoughtfully allocating refunds and planning for additional income sources, advisors can help retirees bolster their financial security while maintaining the flexibility to pursue passion projects or part-time work.
Key Takeaways for Advisors
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Manage Emotional Expectations: Recognize that many retirees treat refunds as a gratifying reward. Coordinate with CPAs to plan for modest refunds that satisfy this desire without sacrificing overall financial health.
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Encourage Strategic Use: Whether it’s paying off debt or boosting an emergency fund, guide clients to leverage refunds in ways that strengthen long-term security.
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Promote Awareness of Tax Credits: Many retirees are unaware of credits like the EITC and Retirement Saver’s Credit. Educate them on eligibility and filing requirements.
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Account for Side Income: Remind clients that side hustles or part-time work can create unexpected tax obligations. Planning ahead prevents year-end surprises.
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Advisors Can Assist Clients with Tax Refund Status:
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Clients can use the IRS “Where’s My Refund?” tool to check the status of their refund as soon as 24 hours after the IRS accepts their return.
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The IRS2Go mobile app also provides refund status updates.
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For automated updates, clients may call the IRS refund hotline at 800-829-1954.
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State Refunds: Each state follows its own timeline, so clients should check with their state tax agency for specific refund schedules.
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By staying proactive and offering tailored guidance, advisors can help retirees transform their tax refunds from mere windfalls into powerful financial tools—bolstering not only immediate needs but also long-term peace of mind.
Related: Navigating Gray Divorce: Insights for Financial Advisors