My Early Retirement and The Government's Role

[Danny]

Quote:

Originally Posted by ERD50 Danny, I am not following your numeric examples at all. What does the 4, 1 and 1 represent? Or are you just being facetious over our 2:1 simplistic demonstration? -ERD50

ERD - Supposed to represent in a simplistic way where the relative amount of money came from. 4 = company profit sharing and 1 = company match and 1 = is my money all being dumped into my 401k plan every year. So lets say I got $4,000 in profit sharing and I put in $1,000 and the company matched that with another $1,000.

the same for the other categories the number represents my or the company's contribution to that category. so for the pension I put 0 in and the company contributed an amount represented by a symbolic 1 (I'm not going to say what the real amount is) Hope that is clearer.

[RetireeRobert]

Quote:

Originally Posted by Danny .......there are certain "other" guys that need their loops holed out and slammed closed...

Then your views do IMHO contain a certain hypocrisy. You must have justified them somehow in your own mind.

[RetireeRobert]

Quote:

Originally Posted by newguy888 True on your point there. But I still had issues with the way the system was set up when I started teaching 30 years ago. I had to join. There was no option. That said I did my part the government should continue to do what was promised and what I signed. If they can't fine change the rules to the new people and make the options clear.

So, your pension plan changed rules on you "after the fact"? Don't get me started on what Oregon Public Employees Retirement System did---change my benefit 3 years AFTER I retired. There are some 16 or 17 lawsuits in various stages now on what Oregon's Legislature did to PERS.

Maybe your system was using Oregon as a precedent.

[Danny]

Quote:

Originally Posted by ERD50 I don't know how to say it any plainer than it has already been said. It is not abstract at all. Let's take ONE example: SS - Look at the entire pie here, the whole thing, input to output. How can the govt take money from workers, and then give any more back to them than they put in? That money cannot just come out of thin air. And, with all the complex regulations, collections, and overhead that eats into it, there is no way that they can pay out $1 for every $1 collected. That is where we throw out the $2 for $1 number. Maybe it is some other number, but whatever, the total output will be less than the total input. What is your 'very real experience'? If you end up collecting more in SS than you put in, that's fine for you, but all-in-all it is a zero-sum game, so if you got more, someone else got less. Is that a good thing? Earlier, it seemed that you did not like the idea of someone doing better than another? They should have their wages capped, or taxed away? So should we limit your SS? Now, all of the above is presented as if SS had it's own 'bank' with deposits and withdrawals. As I understand, that is not the case, but it it secondary to making the point. Money cannot just come out of thin air. I am interested in your reply, but I'm getting the impression you are either pulling our legs, or that you just really do not grasp basic economic principles. This discussion is starting to remind me of some put forth by non-technical people who do not understand the laws of conservation of energy. These people sometimes will insist that if we just put a generator on the front wheels of a car, we could power a motor to run the rear wheels and never need to recharge the car. These people believe it, and nothing you say can convince them other wise, they are sure it is all a conspiracy by 'big oil'. So, if you are serious, explain how SS can pay out more in benefits than people investing the money themselves. -ERD50

Like I said, I'm not taking this as an academic exercise ERD of how everyone does in the SS system and I'm not pulling anyones leg.. I'm looking at it from my perspective only.
The SS has my amount being taken out but also the COMPANY puts a match in. So I'm getting 2 for my 1 and it's possible if I keep eating my vegetables I will get it or make out even better GW but maybe not.

What about my other examples

[Danny]

Quote:

Originally Posted by RetireeRobert Then your views do IMHO contain a certain hypocrisy. You must have justified them somehow in your own mind.

I'm not going to take your bait and start making personal attacks against you Robert.

[RetireeRobert]

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Originally Posted by Danny I'm not going to take your bait and start making personal attacks against you Robert.

If you suggest my comments were a personal attack on you, I reject that. If you took offense at my comments, I am sorry.

You personally seem like a decent fellow. It is your mix of ideas/positions you have publically stated which lead me to my conclusions.

[dumpster56]

Quote:

Originally Posted by RetireeRobert So, your pension plan changed rules on you "after the fact"? Don't get me started on what Oregon Public Employees Retirement System did---change my benefit 3 years AFTER I retired. There are some 16 or 17 lawsuits in various stages now on what Oregon's Legislature did to PERS. Maybe your system was using Oregon as a precedent.

No they have not in my case. I left BEFORE they might change the rules. State law in NJ will not allow them to change rules to already retired . The changes which will be made will be to new hires to the system and people who are still working when or if rules change. It just made me nuts that when you decide to work as a teacher I was not given the ability or choice to not participate and make my own choices. Sure I saved and did other investments BUT the pension was my main way to pack it in early. Then again if I did not work in such an awful environment and live so far financially, ie buying the afforable house 55 miles away and having that 120 round trip commute I might still be working for the public schools in a better district in NJ and still living there. The problem was not one district would hire me with 30 years experience. Too much money to pay me on the salary scales. Local towns pay teachers in NJ. So I sold the big house BEFORE the market has gone soft and cashed out and I must say I am happier than ever. My 3 day a week 4 hour days teaching gig in an elementary school teaching Physical Education to K thru 3 rd grade kids is well Fantastic. Playing games and TEACHING fitness skills to children who WANT to learn is just why I went into teaching in the first place! Teaching 12th grade high school students in a run down inner east coast american city for the past 20+ years over crowded classes 45 to a class, the indiference the fights, the drugs well no wonder I was well burned out ! Glad I had the pension and I was willing to take a reduced benefit at 50YO!

[ERD50]

Quote:

Originally Posted by Danny Like I said, I'm not taking this as an academic exercise ERD of how everyone does in the SS system and I'm not pulling anyones leg.. I'm looking at it from my perspective only. The SS has my amount being taken out but also the COMPANY puts a match in. So I'm getting 2 for my 1 ....

You can't take a microscopic view, claim there is a benefit to a specific individual within that group, and therefore justify the whole system.

I think this is where RetireeRobert's hypocrisy comment comes from - you seem to be saying 'I got mine, the heck with everyone else', but you don't want to hear that when it is someone else (like a successful, motivated, educated, risk taking entrepreneur) that is 'getting' theirs.

That company match money (again...) didn't just come out of thin air. If the company didn't need to give that match money to the gov't to redistribute it, it could have gone to other uses. Part of it to your salary, part of it to investments in the business, part of it in savings passed on to the consumer in lower cost of goods... any number of things that could have created wealth.

At this point, I kind of expect you to say that if the govt didn't take that money from the company, that the company would never have passed it on to any one else, that you just do not believe in free markets. If that is your platform, then you are like the people that want the generator on the front wheels of the car. You are in denial.

-ERD50

[samclem]

Quote:

Originally Posted by Danny The SS has my amount being taken out but also the COMPANY puts a match in. So I'm getting 2 for my 1 and it's possible if I keep eating my vegetables I will get it or make out even better GW but maybe not.

More bad news: In the most fundamental sense, your employer doesn't pay anything to Social Security. It is simply a marketing gimmick that helps hide the true cost of the program to workers.
Here's how it works: An employer needs to hire an employee to perform a certain job. He hires that person in full consideration of the entire amount the employee will cost his business: Pay, medical insurance, Social Security taxes, Medicare taxes, retirement plan funding, etc. If the employer can still make money after all these costs, and if that spending provides him the best marginal return on his money (that is, he couldn't make more profit by hiring an employee to do a different job or by investing in equipment, etc) then he hires the employee.
The employer pays as little as possible to get the employee he needs, but he is in competition with other businesses who also need employees, so he can't pay too little. The prospective employee adds up all the pay and benefits from each prospective employer and then decides which employer is best for him.

The SS tax "paid by the employer" is part of the employer's calculated cost for the employee. If employers did not have to pay that tax, then it would likely go in large part to the employee (since the money available for employee pay at all businesses would increase by 6%, there would be heavy upward pressure on employee pay. Any employer that decided to pocket this money would soon find his employees hired away by other businesses).

So, what you should ask yourself about SS is: How much bigger would my nest egg have been if the government had let me have that 12% of my pay each month (6% from me directly and 6% from me through my employer) and let me invest it? It's easy to do the math using your own pay records provided by SS and the historic return for a portfolio of moderate risk. Plus, the money would be yours to do with as you please: Take a 4% annual withdrawal, buy an annuity, travel the world, pass it along to your kids, spread it among worthy charities. You wouldn't be dependent on Social Security keeping any promises to you. I think you'll find that you'd have been far ahead without the "helpful" intervention of a paternalistic government.

[Danny]

ERD, ziggy, sam and Robert and whoever else agrees - did you or are you now participating in a 401K or IRA or ESOP plan? Has it been beneficial to you?

Will you accept the SS or pension if you have one when you are eligible?

Would you use the 72(t) to make ER possible?

Would you use the 529 if you have kids going to college?

If you are participating in any of these what attracts you to them?"

Would you reject using them on principle because it would be hypocritical? and not fair to others?

[ERD50]

Quote:

Originally Posted by samclem The government doesn't create wealth, ...

samclem, I just wanted to go back and comment on this little sidebar.

I don't know that it is accurate to say that gov't doesn't (as in 'never') create wealth. It may be a small part of their current activity, though. For example, when the govt is in a position to orchestrate infrastructure improvement like highways, municipal water supplies, etc, that can lead to wealth creation. Some of those things are difficult or almost impossible for private business to supply.

And that is where (IMO) govt should be involved - and stop there.

Instead, we get a govt that seems to think we need help in every facet of our life. From that govt panel on taxes:

President's Advisory Panel on Federal Tax Reform - Final Report - November 1, 2005

Quote:

Since the 1986 tax reform bill passed, there have been nearly 15,000 changes to the tax code – equal to more than two changes a day. Each one of these changes had a sponsor, and signed into law

It just seems unfathomable that the public is being served by our legislators using their time to push through two changes to the tax code every day. Anything that needs that much 'fixing' is certainly broken.

-ERD50

[ERD50]

Quote:

Originally Posted by Danny ERD, ziggy, sam and Robert and whoever else agrees - did you or are you now participating in a 401K or IRA or ESOP plan? Has it been beneficial to you? Will you accept the SS or pension if you have one when you are eligible? Would you use the 72(t) to make ER possible? Would you use the 529 if you have kids going to college? If you are participating in any of these what attracts you to them?" Would you reject using them on principle because it would be hypocritical? and not fair to others?

Danny, this is a different (edit: and totally irrelevant) argument entirely.

Let's stick to just one example for simplicity and clarity - SS. I had no choice in the matter. My money was taken, and my employer's money was taken. Given that FACT, no, I don't have a problem in accepting the SS payments that I will get under this system. That does not mean that I approve of the system. One might choose to do that as a matter of principle, but I realistically would not expect that to change the system. So no, I won't turn down those payments.

A much better and relevant question would be:

Would you have liked the option of having you and your employer opt out of SS, knowing that you would not be eligible for SS benefits?

I certainly would consider that option. No hypocrisy to that, is there?

-ERD50

[Danny]

Yes, we know SS is not voluntary, but I'm dealing with an actual real practical not a theoretical of what could be if.... ERD.

What about the other items - are you using 401K, IRA, 72(t) ....

If you are participating in any of these what attracts you to them?"

Would you reject using them on principle because it would be hypocritical? and not fair to others? That they are not wealth creating and just smoke and mirrors a zero sum game

[samclem]

1) Yes, I'm participating in a 401K plan. We are stuck with the idiotic tax code we have and that is one of the available means big brother has provided to allow us to squirrel money away. I am paying for that loophole (in higher taxes elsewhere) and as it is entirely legal to take it, I do so.

2) SS Pension: Yes. I don't lke the program as it is structured. But the government has already decreased by personal wealth by hundreds of thousands of dollars with this program, so I will take the pennies on the dollar I'll get when I am eligible. But I won't for a minute think the program helped me.

3) 72T: probably not, we'll see. Same as above

4) 529: Yes, using it. Same rationale as #1.

5) It's not hypocritical to use them. I don't like many aspects of the system, but the rules are there, I'm a citizen, and I obey them. What would be hypocritical is to say (as Warren Buffet has said, in effect ) "I don't like the system, I believe I should be paying more to the federal government" and then not pay more. Hey, anybody who believes they aren't paying enough is free to contribute more (there's a mechanism for it). But don't say that you aren't paying enough after deliberately structuring your affairs to minimize taxes AND THEN refuse to contribute more voluntarily.

[ERD50]

Quote:

Originally Posted by Danny If you are participating in any of these what attracts you to them?"

I'll tackle this one also.

The convoluted, often self-defeating, counter-intuitive jumble of tax laws sometimes puts an individual in the position where they need to play the stupid game just to recoup part of what the govt appropriates from them.

If the govt takes $10 from me, and then tells me I can get $6 back by filling out this form, of course I'm going to fill out the form. But that does not mean that I wouldn't rather just have my $10. <<edit: and, it is not hypocritical to fill out the form. It is just jumping through hoops that the govt wastes their time subjecting us too. I'd like them to invest their resources more wisely)>>

Do you really not 'get' this?

Somehow, I think this all gets back to your idea the the govt should redistribute wealth ( 'wealth' being defined as people with more than you). I don't think it has anything to do with you thinking that these things are 'benefits' to people in general, since you never seem to address that direct question.

-ERD50

[ERD50]

Quote:

Originally Posted by Danny Yes, we know SS is not voluntary, but I'm dealing with an actual real practical not a theoretical of what could be if.... ERD.

Danny, if you want to continue this discussion, you need to stop talking out of both sides of your mouth.

YOU included SS in your list, and when I respond you say that I shouldn't deal with the SS issue? :confused:

I get the impression that you are either trolling, deluding yourself, rationalizing, or just very confused.

-ERD50

[Danny]

Quote:

Originally Posted by ERD50 Danny, if you want to continue this discussion, you need to stop talking out of both sides of your mouth. YOU included SS in your list, and when I respond you say that I shouldn't deal with the SS issue? :confused: I get the impression that you are either trolling, deluding yourself, rationalizing, or just very confused. -ERD50

All these have to do with the getting of my money for ER and giving the Gov a percent of it...

SS is one of the 9 items of my list - this has been mostly your focus - where did I say not to deal with it - not talking out of both sides just the front - not trolling deluding rationalizing or getting confused..

I do think you are starting to project on to me your own conditions and issues and are assuming this defense mechanism to not admit there are holes in your logic on my topic ..

[ERD50]

Quote:

Originally Posted by Danny I do think you are starting to project on to me your own conditions and issues and are assuming this defense mechanism to not admit there are holes in your logic on my topic ..

Then please address the holes in my logic.

I've asked several times - how can the govt collect money from me and my employer, and then give me back more than what was given to them? I could do it better w/o govt interference and overhead.

I stuck to SS because it is sufficient to get the point across. Why diffuse the discussion by talking about 9 issues when one of them serves as a proxy for all?

-ERD50

[cute fuzzy bunny]

People throw parties when their coworkers retire. Sometimes they invite the person.

[RetireeRobert]

Quote:

Originally Posted by newguy888 No they have not in my case. I left BEFORE they might change the rules. State law in NJ will not allow them to change rules to already retired . The changes which will be made will be to new hires to the system and people who are still working when or if rules change. It just made me nuts that when you decide to work as a teacher I was not given the ability or choice to not participate and make my own choices. Sure I saved and did other investments BUT the pension was my main way to pack it in early. Then again if I did not work in such an awful environment and live so far financially, ie buying the afforable house 55 miles away and having that 120 round trip commute I might still be working for the public schools in a better district in NJ and still living there. The problem was not one district would hire me with 30 years experience. Too much money to pay me on the salary scales. Local towns pay teachers in NJ. So I sold the big house BEFORE the market has gone soft and cashed out and I must say I am happier than ever. My 3 day a week 4 hour days teaching gig in an elementary school teaching Physical Education to K thru 3 rd grade kids is well Fantastic. Playing games and TEACHING fitness skills to children who WANT to learn is just why I went into teaching in the first place! Teaching 12th grade high school students in a run down inner east coast american city for the past 20+ years over crowded classes 45 to a class, the indiference the fights, the drugs well no wonder I was well burned out ! Glad I had the pension and I was willing to take a reduced benefit at 50YO!

Sounds like "semi-retirement" is revitalizing you.

I hear what you are saying too about leaving before they could change the pension rules on you. A lot of that happened in Oregon too. Almost a sort of forced retirement---people deciding to leave before they would have otherwise. Fortunately, I left on my own schedule. But the Oregon Pols threw a curve ball and made one change retroactive. Kind of ex post facto which I always thought was illegal, but they did it, and now that and several other changes are in court.

Anyway, consider your part-time schedule as kind of a dress rehearsal for full blown retirement. I think you will like it.