My Early Retirement and The Government's Role

[ERD50]

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

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]

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]

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]

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?

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

-ERD50

 

[Danny]

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?

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]

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]

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.

 

[RetireeRobert]

Those "wealthy" folks making $200k+ a year (and to whose class I would aspire to belong one day), take advantage of the "loophole" of not paying a surcharge (which you and others of your belief would impose on them) on their income.

That is to say, the $200k+ folks follow the legislatively enacted tax laws, and so manage their affairs as to pay the minimum legally required of them. In short, they are merely acting in their own self-interest, according to the laws of the land.

Now, this decent fellow Danny, has discovered several laws of the land involving such things as 401ks, SS, 529's, 72t, and so on. He is a logical fellow and takes full advantage of these legislatively enacted laws of the land. Danny acts in his own self-interest. He is not greedy, not selfish, or anthing like that. Rather he is merely rational to arrange his affairs so as to minimize his legally required tax bite and maximize his personal wealth.

Now Retireerobert comes along and looks at Danny doing what he does, and looks at a 200k+ income chap doing what that chap does. Retireerobert sees two rational individuals acting in their own self interests in accord with the laws of the land.

Retireerobert thinks to himself---what a great country! Was I lucky to be born an American or what! And Retireerobert regards

 

[RetireeRobert]

Those "wealthy" folks making $200k+ a year (and to whose class I would aspire to belong one day), take advantage of the "loophole" of not paying a surcharge (which you and others of your belief would impose on them) on their income. These 200k+ folks, who comprise 1% or 5% or 10% of all taxpayers, are not shirkers. Per IRS data, they now pay some 50% or 70% or 80% of total income taxes collected by the IRS each year.

That is to say, the $200k+ folks follow the current legislatively enacted tax laws, and so manage their affairs as to pay the minimum legally required of them. In short, they are merely acting in their own self-interest, according to the laws of the land.

Now, this decent fellow Danny, has discovered several laws of the land involving such things as 401ks, SS, 529's, 72t, and so on. He is a logical fellow and takes full advantage of these legislatively enacted laws of the land. Danny acts in his own self-interest. He is not greedy, not selfish, or anthing like that. Rather he is merely rational to arrange his affairs so as to minimize his legally required tax bite and maximize his personal wealth.

Now Retireerobert comes along and looks at Danny doing what he does, and looks at a 200k+ income chap doing what that chap does. Retireerobert sees two rational individuals acting in their own self interests in accord with the laws of the land.

Retireerobert thinks to himself---what a great country! Was I lucky to be born an American or what! And Retireerobert regards both Danny and the 200k+ chap as a couple of similarly lucky brothers. One is no better than the other.

 

[Martha]

Man, poor Dan, with you guys jabbing him over and over. ERD, do you have to argue with everyone all the time?

So, say you eliminate 401k plans, retirement fund tax breaks and eliminate SS and medicare. In return, government reduces taxes accordingly.

Some people, especially the rich and the healthy, will do just fine, saving their money, buying insurance, or self insuring. There is a good chance that a number of people will start saving late and thus won't be able to retire. Ever. God knows what will happen with their medical needs. Maybe they get ill and lose all the money they were able to save. Some people won't be able to make it at all.

I don't have a problem that our government has a bit of a paternalistic bent and helps us take care of ourselves by encouraging retirement saving, college education saving and providing SS and medicare.

We are all in this together.

 

[cute fuzzy bunny]

Interesting thread before it deconstructed.

I had the same experiences Dan.

Govt tax and business benefits gave me stock options, employee stock purchase plans, 401k's and pension plans. Direct benefits are tax free capital gains on real estate, tax friendly programs like the IRA and Roth IRA.

Eventually a possibility of getting that social security money back and yeah, I'd have peed most of it away if you'd handed it to me in my 20's.

Either medicare or fully socialized medicine by the time I'm in my 60's.

So while uncle sam sure took his share from my wallet over the years, programs helped me pull more money out of old megacorp and my own investments than I might have managed 100 years ago.

 

[Bill T]

I would like to see the Goverment get out of the peoples way with lowering the tax rate and doing away with the capial gain tax. I'm in retirement and with all these tax increases coming our way in the next couple years it's going to force me back to to work just because of the taxes.

 

[Danny]

It's alright [-]ma[/-] Martha and Bunny, I'm only bleeding, welcome to the Alamo and thanks for coming.....

 

[ERD50]

Man, poor Dan, with you guys jabbing him over and over.

Martha, one of the oft quoted problems of email and forum postings is the inability to convey nuance. I am unsure of the nuance in your comment, and you may have missed mine. So, at the risk of missing that nuance, I'll take it fairly literally:

poor Dan? Dan has started a couple threads recently professing the superiority of letting the govt control our decisions, and controlling both minimum and maximum wages. That's his view and he is entitled to it. It is (for the most part) not my view. So I challenged, and he responded and a discussion evolved. In another thread, he said he didn't want to get into defending whether we have a free market or not, so I backed off. Fair enough? Like the saying goes, if you can't stand the heat, stay out of the kitchen?

ERD, do you have to argue with everyone all the time?

No Ma'am, I mean YES Ma'am, I mean.... arghhh, thats one of those trick lawyer questions isn't it?! Can I plead the Fifth?

More seriously, it depends on the topic, and your definition of 'argue'. Maybe what you see as 'arguing', I see as 'lively debate', and an opportunity to challenge my own understanding of the issues, and to learn. On this forum, I generally like to share information, and debate policies. Depends on the topic and my mood. Is there something wrong with that?

Even the very non-confrontational HaHa questioned whether Danny was just trying to stir things up. I don't think my questions/challenges were out-of-line. But heck, that's from my POV.

I think you mentioned being late to the thread - maybe you missed this, I think it adds perspective (added emphasis this time):

I'll repeat here, so no one takes the above out of context: I'm OK with govt programs that fill a gap that private business/charities cannot. I'm OK with social programs for the truly needy, and things that help people get a step up and improve themselves - I think we ALL benefit from that, even if indirectly.

-ERD50

So no, I'm not against all govt programs, but I do question (challenge? argue??) the many 'shell-games' that are pawned off as 'benefits'.

So, say you eliminate 401k plans, retirement fund tax breaks and eliminate SS and medicare. In return, government reduces taxes accordingly.

Well, I'll give you my opinion, but only if don't accuse me of arguing

Yes, I can see where it can be a good thing for the govt to encourage (maybe even 'force') people to save for retirement. Not everyone has the foresight to do it. But the problem is, the current jumble of regulations is a mess that lacks direction, and much of it is a shell-game. Look at it this way:

If you want to build a house, you don't just build a bathroom, then add a kitchen over there, and then add a few bedrooms, then decide to add a second floor, etc. You define your needs, then ARCHITECT it and PLAN it to meet that need. Then you build it. But the govt programs are mostly a mumble-jumble of 'solutions'.

Take SS for example. Explain it to me, I don't get it. Is it to help secure a basic retirement for the lowest of the working class (those that would need it the most)? If so, then why do the people who make the most money get the highest benefit? Shouldn't it be just the other way around? So what 'problem' is it trying to solve?

There are dozens (probably thousands) of examples like that . See T-Al's comments about how the 'hybrid' but low-mpg SUV is allowed in the HOV lane, but not the much higher mpg 'standard' vehicle:

http://www.early-retirement.org/forums/showpost.php?p=575659&postcount=43

Again, what 'problem' is it trying to solve? Do we want hybrids, or do we want high MPG cars (regardless of the technology)?

So, with examples like that, don't I have good reason to be more than a little skeptical (and a little vocal) when I hear someone put the words 'govt' and 'here to help you' in the same sentence?

-ERD50

 

[cute fuzzy bunny]

There is a point where it passes from skepticism and healthy discussion and becomes asshattery. And that point seems to come often.

My hats off to all the political hacks who helped make ER happen for me!

 

[RetireeRobert]

There is a point where it passes from skepticism and healthy discussion and becomes asshattery. And that point seems to come often.

This Fuzzy contribution to this thread, to elevate things?

 

[armor99]

Take SS for example. Explain it to me, I don't get it. Is it to help secure a basic retirement for the lowest of the working class (those that would need it the most)? If so, then why do the people who make the most money get the highest benefit? Shouldn't it be just the other way around? So what 'problem' is it trying to solve?
-ERD50

You are certainly not alone in your thinking ERD50.... and your logic is not flawed a bit. SS, as I have said in other postings is basically a giant Ponzi scam or pyramid scheme if you will. They take several peoples money that contribute into the system, and as long as there are many fewer people taking out than putting in, the system works just fine. But what happens when the number of contributers goes down, and the receivers go up? Well... that would be the exact situation that we have now, with the system having a hard time keeping solvent.
As a younger worker I HATE not being able to opt out of SS. It is a system I do not want to use, and worse still... it may have no benefit for me at all when I get to my own retirement. As to what "problem" is SS trying to solve? That one is easy ERD50. The truth is that SS is a way to help apease a gulity concience. (where there should not be one I might add) There are many people in america that truly beleive that they should never be happy, or have anything of value, while anyone else is suffering anywhere at any time. Whether these folks did it to themselves or not is of no concern to them. SS moves in the direction of the govt must help everyone, and that is the direction that they want to go. The most ironic thing that I have found though, is that those who preach how great SS is and all of the other social programs are, seem to benefit the most from them. If you ever told them that those LESS fortunate than they are need more from them personally, the illusion is broken. Sort of like people that say they want anarchy, and then call the police when their place is broken into. The truth is... they want anarchy for THEM but everone else has to follow the law. Sort of the same thing with folks that preach socialism I have found. I think capitalism is a far superior system, and I preach it for everyone to use, not just some of us.

 

[cute fuzzy bunny]

This Fuzzy contribution to this thread, to elevate things?

Actually that was back a few posts.

I certainly could not hope to rise past the level of suggesting that someones ideas were hypocrisy and delusional.

 

[FinanceDude]

SS, as I have said in other postings is basically a giant Ponzi scam or pyramid scheme if you will. They take several peoples money that contribute into the system, and as long as there are many fewer people taking out than putting in, the system works just fine. But what happens when the number of contributers goes down, and the receivers go up? Well... that would be the exact situation that we have now, with the system having a hard time keeping solvent.
As a younger worker I HATE not being able to opt out of SS. It is a system I do not want to use, and worse still... it may have no benefit for me at all when I get to my own retirement.

It's not the govt's fault when you were born........

As to what "problem" is SS trying to solve? That one is easy ERD50. The truth is that SS is a way to help apease a gulity concience. (where there should not be one I might add) There are many people in america that truly beleive that they should never be happy, or have anything of value, while anyone else is suffering anywhere at any time. Whether these folks did it to themselves or not is of no concern to them. SS moves in the direction of the govt must help everyone, and that is the direction that they want to go. The most ironic thing that I have found though, is that those who preach how great SS is and all of the other social programs are, seem to benefit the most from them. If you ever told them that those LESS fortunate than they are need more from them personally, the illusion is broken. Sort of like people that say they want anarchy, and then call the police when their place is broken into. The truth is... they want anarchy for THEM but everone else has to follow the law. Sort of the same thing with folks that preach socialism I have found. I think capitalism is a far superior system, and I preach it for everyone to use, not just some of us.

The problem SS was trying to "solve" was in 1935, in the middle of the Great Depression. Today's "problem" is different from then.........

Further proof that when grandiose social program legislation is approved, it becomes more and more difficult to modify and control it's size and influence..........

SS is now a three-headed Medusa that even the most well-meaning politician won't touch if they want to get re-eelected.........

To me, Medicare is the biggest problem, not SS.......

 

[RetireeRobert]

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

Is the SS system an old model still trying to solve the problem of the 1930's? And is it therefore not a suitable model for the 21st century?

 

[armor99]

It's not the govt's fault when you were born........



The problem SS was trying to "solve" was in 1935, in the middle of the Great Depression. Today's "problem" is different from then.........

Further proof that when grandiose social program legislation is approved, it becomes more and more difficult to modify and control it's size and influence..........

SS is now a three-headed Medusa that even the most well-meaning politician won't touch if they want to get re-eelected.........

To me, Medicare is the biggest problem, not SS.......

Medicare is exactly the same thing, and it will operate the exact same way for the exact same reasons. And you are right no politician on the left or right wants to touch it, because to FIX it... (dismantle it) will cause great pain to one group or another that now depends on it. Which for me begs the obvious question, why was it allowed to get to this state? Why? Because there are always those people looking for something for nothing. Those who continue to believe that there is such a thing as a "free lunch". The reality is... someone always has to pay for YOUR free lunch. Although most of the people that do the "eating" seem not to care who the payer is, as long as that bill gets paid.

 

[cute fuzzy bunny]

Is the SS system an old model still trying to solve the problem of the 1930's? And is it therefore not a suitable model for the 21st century?

Not sure what that has to do with the line you quoted, but hell, why not?

The 'problem' that social security 'solved' in its day was that people rarely retired and often worked until they dropped, providing they could actually find work. The work they did find was often grueling. The very old who had no families to care for them often lived in group homes and pooled their meager funds to get by, and frequently died well before they should have.

We decided as a society to "take the next step" and help people save for their eventual old age, since people stunk at doing so themselves.

They still stink at it.

Will we take a step back from that goal to help prevent the short sighted masses from suffering in poverty and dying?

Lets also quit on that public education thing too. Dang people shouldnt have children if they cant afford to educate them. That'd work out great for people without children. Until about 20 years went by.

Its obviously a displeasing discovery that people who make good choices and plan well have to bail out those who dont. But thats what this One Nation, Indivisible, Promoting The General Welfare and all that sort of stuff means I suppose.

I can understand how someone who feels they can take care of themselves and their own would want to remove themselves from those that cant or wont. Vote with your mouth and if majority rule is not to ones liking, vote with your feet.