Getting closer to FIRE!

[FUEGO]

Wow. Not sure what to say about this. Not trying to pick a fight, but not sure I understand the logic; getting your degree was an important component to your ER. Do you think it's right to expect the rest of us (taxpayers) to pick up your tab so you can ER? Or am I missing something?

You may want to refer to another thread running concurrently where I have discussed this issue for my rationale:

http://www.early-retirement.org/for...cking-practicalities-49343-6.html#post1059461


In short my answer is no, I don't think it is right that the current system is in place that allows me to do this. But it is my obligation to myself and my family to maximize family resources by taking advantage of legitimate programs offered by the federal government, including tax subsidies, tax credits, deductions, loan forgiveness, mortgage modifications, etc if I legitimately qualify.

 

[Westernskies]

You may want to refer to another thread running concurrently where I have discussed this issue for my rationale.

I did.

Bottom line is you're turning your $100K+ debt into my debt so you can ER at 30-something. You took the money, got the education, have the means to repay it, but instead are making a conscious decision to stick your fellow citizens with the bill.

IMO, it's a slap in the face to those of us who made the same obligation you did, but honored our student loan commitments as repayment for our educational opportunities.

It's your decision, but it isn't right IMO... but, hey, at least pay us back for the money we wasted on that Ethics course?

 

[FUEGO]

I did.

Bottom line is you're turning your $100K+ debt into my debt so you can ER at 30-something. You took the money, got the education, have the means to repay it, but instead are making a conscious decision to stick your fellow citizens with the bill.

IMO, it's a slap in the face to those of us who made the same obligation you did, but honored our student loan commitments as repayment for our educational opportunities.

It's your decision, but it isn't right IMO... but, hey, at least pay us back for the money we wasted on that Ethics course?

I didn't get much out of the law school ethics course. Barely passed it in fact. I figured a low score in Ethics would be a huge marketing point when applying to Big Law firms...

Hey, I understand it burns you up. I feel the same way about a lot of BS stuff in the tax code. I figure here is my one chance to get my hands on a chunk of government largess (paid by folks like you of course). My feeling is that I am largely throwing money away on my SS contributions and medicare contribs from my paycheck (our biggest source of taxes by far), yet folks in your age bracket will probably benefit to the full extent of current policies. Ya win some and ya lose some.

If I recall correctly, you like to buy big houses, and sell them to make tax free cap gains at some point. The tax you avoid (or will avoid) probably exceeds what my student loan debt forgiveness will be. Is this provision of tax free cap gains on potentially a quarter million in income on average every year "fair" to someone like me who chooses to own a much more modest house? Nope. I get over it and move on to searching for other ways to maximize my return from the government, since I know they will soak me however and whenever they can so they can get more money to waste on crap I really don't care about. I know I'll use that $100,000 in loan forgiveness money much more efficiently than the federal government will.

As the great late JFK said, "Ask not what you can do for your country, but ask what your country can do for you". I think I updated that correctly for the contemporary entitlement mentality?

 

[donheff]

I didn't get much out of the law school ethics course. Barely passed it in fact. I figured a low score in Ethics would be a huge marketing point when applying to Big Law firms...

Hey, I understand it burns you up. I feel the same way about a lot of BS stuff in the tax code. I figure here is my one chance to get my hands on a chunk of government largess (paid by folks like you of course). My feeling is that I am largely throwing money away on my SS contributions and medicare contribs from my paycheck (our biggest source of taxes by far), yet folks in your age bracket will probably benefit to the full extent of current policies. Ya win some and ya lose some.

If I recall correctly, you like to buy big houses, and sell them to make tax free cap gains at some point. The tax you avoid (or will avoid) probably exceeds what my student loan debt forgiveness will be. Is this provision of tax free cap gains on potentially a quarter million in income on average every year "fair" to someone like me who chooses to own a much more modest house? Nope. I get over it and move on to searching for other ways to maximize my return from the government, since I know they will soak me however and whenever they can so they can get more money to waste on crap I really don't care about. I know I'll use that $100,000 in loan forgiveness money much more efficiently than the federal government will.

As the great late JFK said, "Ask not what you can do for your country, but ask what your country can do for you". I think I updated that correctly for the contemporary entitlement mentality?

Well said Fuego. The tax code is what it is. If we don't like it we can change it. In the meantime we should take full advantage of it. I fumed mightily at the Bush tax cuts (and at the Reagan cuts before them) despite the fact that they would clearly be a bonanza for me. I would gladly have paid those extra taxes when I could easily afford them. Now I hope Obama gets his way on both stopping the extension of the cuts and pulling back some of the "tax spending" for the top 2%. It won't be out of my hide this time and I won't volunteer to donate.

 

[teejayevans]

Healthcare has an asterisk next to it in my personal accounting, because I don't know what will happen to it. I think I'll know by 2014 though, and this time line corresponds with when I think I'll have enough to be FI. I personally think if obamacare stays around and gets implemented in roughly the current configuration, then after a year or two people will think of it as a sacred cow entitlement, and it will remain in place. Of course if it is substantially modified or removed, then I'll be working for a while longer to accumulate more $$ for insurance.

Actually, you'll know on Nov 7th, 2012
Yes, if you can keep your income low (<20000), your insurance will be subsidized, $4K->$1K. HOWEVER, rules can change, especially if they stop using income and start using net assets, which I believe medicaid uses.
TJ

 

[randy082054]

Well, congratulations on your little student loan scam & it's boost toward your ER. Rationalize it all you want, it's still cheating, and the pats on the back you're getting for your accomplishment disgust me enough to exit this forum permanently.

 

[FUEGO]

Actually, you'll know on Nov 7th, 2012
Yes, if you can keep your income low (<20000), your insurance will be subsidized, $4K->$1K. HOWEVER, rules can change, especially if they stop using income and start using net assets, which I believe medicaid uses.
TJ

I don't think we will know in Nov 2012. Maybe if there is a major landslide in favor of one party. Maybe.

Once they start using asset tests like medicaid uses, lower class middle americans will march on washington because they can't get their cheap/free medical insurance any more if they have more than a couple bucks in the bank.

And for a family of 4, like I currently have (and will have for at least 14-18 more years), I think the income is something like $30000 before you start paying a thousand or so a year. But at that threshold when you start paying, you go from medicaid to regular insurance (from the exchanges??), so there could be drastic differences in choice of doctors and access to medical care. Depending on how things turn out, there could be a de facto two tier system of health care - those who get the free medicaid and those who pay something (or a lot) for subsidized health insurance.

All subject to change according to how the political winds blow. Hence why I am taking the wait and see approach.

 

[FUEGO]

Well, congratulations on your little student loan scam & it's boost toward your ER. Rationalize it all you want, it's still cheating, and the pats on the back you're getting for your accomplishment disgust me enough to exit this forum permanently.

Not that you would ever receive this message since you took your ball and went home, but if this is the general caliber of the posts you write, then I think we are all wiser now that you have left. Thanks!

 

[donheff]

Well, congratulations on your little student loan scam & it's boost toward your ER. Rationalize it all you want, it's still cheating, and the pats on the back you're getting for your accomplishment disgust me enough to exit this forum permanently.

Seriously, Randy - do you see GE's efforts to minimize its taxes as "cheating" or is it maximizing shareholder advantage under existing law? Shareholders would have a good case against GE if it did not take advantage of loopholes available to it. This is no different. If Fuego hid his income he would be cheating. Taking advantage of a deduction, credit, or limited payback provision provided by law is entirely proper. It sounds like the current law has - in effect - given low income types a retroactive scholarship. Campaign to change the law if you don't like it but call the scholarship recipient a cheat -- over the top.

 

[FIREd]

I just sent a large check to the IRS this morning . But I am not mad at people who take full advantage of the current tax code or government programs. If anything, I would want FUEGO to handle my taxes next year! Maybe he can find me some sweet deduction or government program I overlooked!

 

[teejayevans]

I just sent a large check to the IRS this morning . But I am not mad at people who take full advantage of the current tax code or government programs. If anything, I would want FUEGO to handle my taxes next year! Maybe he can find me some sweet deduction or government program I overlooked!

I think there is a difference between taking advantage of the tax deductions available for everyone to use and getting a student loan care of the taxpayers and working the system so you don't have to repay it.
TJ

 

[Westernskies]

If I recall correctly, you like to buy big houses, and sell them to make tax free cap gains at some point. The tax you avoid (or will avoid) probably exceeds what my student loan debt forgiveness will be. Is this provision of tax free cap gains on potentially a quarter million in income on average every year "fair" to someone like me who chooses to own a much more modest house? Nope. I get over it and move on to searching for other ways to maximize my return from the government, since I know they will soak me however and whenever they can so they can get more money to waste on crap I really don't care about. I know I'll use that $100,000 in loan forgiveness money much more efficiently than the federal government will.

You recall incorrectly. I did buy a big house- one (1), but to live in. First really nice home I've ever owned, after 25+ years of climbing the property ladder, mostly through sweat equity. I took out a mortgage to buy it, but the difference is when the value declined a bit I didn't go back and weasel a taxpayer-funded loan modification out of my mortgage company. I'm paying my own bills, not expecting the guy next door to pick up my tab. Not sure where your numbers are coming from, but "tax free cap gains on potentially a quarter million in income on average every year" isn't even close. I'll live here for a few years, downsize for ER and move on. Will I make $$ when I sell it? I hope so, but it will be under the same primary residence $$ capital gains threshold as the modest home we're all helping you buy.

Maximizing your return from a government you don't respect isn't the same as throwing away your own self-respect on your personal debts. You signed those student loan and mortgage notes, and reaped the benefits of an education and a comfortable home for your family in return. Why should "we the people" have to pick up the tab because you've managed to find a loophole (intended for low-income people that really need the help, IMO you're stealing from them first) to slither through?

It's your decision, but you have to be able to look in the mirror and your kids in the eye and be able to say that daddy is doing the right thing here. But teaching them that they can enrich their lives through broken promises, unfulfilled obligations, and government subsidies isn't going to serve them well as adults. Just my opinion, of course.

Rationalize this all you want, but two wrongs don't make a right. That was only part of what you missed in that ethics course you struggled with...

One thing we can agree on here- this burns me up, both your cavalier attitude toward your personal debts and the pats on the back you've received from folks here on the forum about your ER- wonder how many of them knew just how you're doing it?- or how much of it they are subsidizing?

Rant over.

 

[FIREd]

I think there is a difference between taking advantage of the tax deductions available for everyone to use and getting a student loan care of the taxpayers and working the system so you don't have to repay it.
TJ

Many tax deductions are not available to everyone. MY MIL can deduct her healthcare expenses, and I can't. She can deduct her IRA contributions, and I can't. Because I pay the AMT, there are plenty of other deductions I can't claim. Not fair!

Is FUEGO breaking the law in any way?

I used to get steamed by people who did a strategic default on their mortgage. Yet most everyone on this board seemed to agree that sticking it to the banks was legal (if not moral), and therefore such course of action should be pursued if it made business sense for the homeowner. In other words, the prevailing attitude was it's not personal, it's business...

Assuming FUEGO is not breaking the law, how is that any different? He found a legal loophole, and just like GE, he is using it to the fullest.

The problem is not with FUEGO. The problem is with a system with too many loopholes.

 

[nun]

I think there is a difference between taking advantage of the tax deductions available for everyone to use and getting a student loan care of the taxpayers and working the system so you don't have to repay it.
TJ

Legal things are not necessarily ethical and the amount of thought and effort that go into gaming the system are a factor. We know unethical behaviour when we see it.

So using Turbotax to take allowed deductions and paying at the Bush tax rates is lawful and ethical. GE's approach to tax; legal and unethical. Fuego's student loan scheme also legal but unethical. Using SS and Medicare payments as an excuse, just makes it worse.

Simply protecting you individual interests at the expense of others is one of the major problems we have today and why I often disagree with fundamentalist conservative philosophies that promote the rights of the individual in all circumstances without regard to context. I can't agree with the argument of "it's business not personal" and I don't accept that money and return should be the only things of value to shareholders or ourselves. Integrity is worth a great deal. If it was legal to take candy from a baby would you?

 

[FinanceDude]

FUEGO is not breaking the law, unless morality is a law...........

 

[FIREd]

If it was legal to take candy from a baby would you?

What kind of candy? If it's M&Ms, darn right I'll take candy from the baby. Besides it would be a chocking hazard and therefore stealing candy from a baby would make me a responsible adult...

 

[NW-Bound]

My closest friend who is a libertarian is right again. A system that "takes from each according to his ability", and "gives to each according to his needs" will eventually get to where we are.

If we forgive loans based on one's income, how do we differentiate between one's lack of income due to not being able to find work, versus not wanting to work and just wanting to ER?

We penalize a couple who together make $300K, and would tax them differently if they were two individuals making $150K each. Is that because of the different needs?

If you go through the SS calculator, you will find that someone who pays 40 years into the system will not be getting 4 times more than a person who works the minimum 10 years.

 

[mystang52]

This debate is akin to debating religion or politics. But no matter how you spin it, every defintion of "loan" includes a presumption of good-faith intention to repay.

 

[Bean]

Just a simple post to show support of Westernskies post. He/She explain my shared opinion better than I could.

It fears me to see the tax code being referenced as the guide between right and wrong on this particular issue. The tax code is a guide for calculating tax liability, nothing more.

I love to read the stories on this forum about people who worked hard, saved, took calculated risks with their money, and are now looking forward to or currently experiencing FIRE/ER. However, a strategy of defaulting on loans, when one is capable, and using the tax code as justification for their actions is disheartening.

 

[donheff]

I don't know, maybe all of you personal responsibility advocates have a point. But I sure like a good scheme

 

[FUEGO]

I don't know, maybe all of you personal responsibility advocates have a point. But I sure like a good scheme

It's funny because I fall down on the personal responsibility side of the aisle (to the right if you know what I mean). But I would be a fool NOT to take advantage of opportunities that present themselves.

Some here criticize, and question whether I can look my kids in the eye. Now I'll have more time to spend with them. I try to explain to them that the system is frequently broken in many places. But I would not in good conscience be able to council them against receiving free money when offered. Because they will be paying it back. While all the current folks on this board will be ER'd, my kids will be slaving away paying taxes to repay the debt currently incurred and to pay the social welfare benefits (medicare and SS) of those retired. Thems the breaks.

I guess no one wants to hear about how my kids will probably get free or nearly free lunches at school either? (gas to FIRE gas to FIRE)

 

[Westernskies]

But I would not in good conscience be able to council them against receiving free money when offered. Because they will be paying it back.

Including the "free"money you're getting on your loan mod and student loans... "Do as I say, not as I do?"

I guess no one wants to hear about how my kids will probably get free or nearly free lunches at school either? (gas to FIRE gas to FIRE)

Why not send them to school with "free" cheese sandwiches instead?- I hear the feds are still handing it out to the truly needy. That way they won't have the social stigma of carrying their junior welfare meal cards.

Self-respect is over-rated anyway.

 

[WB52]

Fuego,
+1 to those critical of your position regarding defaulting on the student loans as a strategy and not a necessity.
You CAN pay them back, but you chose not to because you do not WANT to and think you can get away with it. You have placed your WANTS in front of your integrity. If it benefits you to steal or lie (both of which you are doing by defaulting on the loans), would you continue to do so?
Shame.

 

[nun]

There may be a similar ethical choice in my future. I live in MA and if my annual income is under $35k a year I will be eligible for state subsidized health care. I've looked at the forms and made initial enquiries with the state and it seems that they don't take total assets into account, just annual income. With my house paid off and no other debt my need for income is less than $35k a year. So even though my portfolio will be more than $1M, I can arrange things so that I take enough each year to qualify for the subsidized health care. Should I do that when I can easily afford to pay for health care without the state subsidy?

 

[FUEGO]

Including the "free"money you're getting on your loan mod and student loans... "Do as I say, not as I do?"

I think my message got crossed. I am saying that I WOULD tell my kids to take advantage of all these programs and giveaways. Because they are going to be paying more for these programs in some manner for most of their adult life (regardless of whether they take advantage of these programs). So "Do as I do" is the advice I would give. Hate to be a hypocrite.

Why not send them to school with "free" cheese sandwiches instead?- I hear the feds are still handing it out to the truly needy. That way they won't have the social stigma of carrying their junior welfare meal cards.

Self-respect is over-rated anyway.

I believe food stamps are asset tested, hence I would (rightfully so) not qualify. For some reason Free and reduced lunches are not asset tested, therefore I would likely be eligible based on income alone (for reduced lunch, maybe free lunch some years). Qualifying for free or reduced lunch also enables my children to get access to many extracurricular programs and private tutoring at their school that we currently do not qualify for (due to our income). Their school is something like 90% free/reduced lunch which makes it rather high poverty (on paper at least).

Besides, why would I allow my kids to eat mere cheese sandwiches when they can eat a hot meal paid for by others? It's entitlement central over here. Just trying to get my kids a piece of the pie, cake, pizza, green beans, tater tots, and milk. I think the school actually makes a slight profit off of giving away free lunches, so I'm just doing my part to get funding for our school.

Look, all these entitlement programs and subsidies bug me too. I wish we weren't paying for all this, because it doesn't seem like it is necessary in many cases (in my case and many others).

But, hey, some day I may need the money I am saving to do things like pay for other social welfare programs via higher income taxes, broader reach of AMT, imposition of a National sales tax or VAT, partial loss of SS and/or medicare due to means testing, etc.

I would prefer the system to be rejiggered so that we don't spend money like drunken sailors on this stuff, but I'm not going to let myself be taken advantage of in the mean time.