Despite all the benefits of financial independence and early retirement, it’s actually better that not everybody retires early. In every society there are rules to follow and protocols to obey. Retiring before the age of 60 is a violation of such protocols.
Some of you may think I’m doing society a service by helping people get into financial shape by writing all this free content. But there’s a growing minority who think I’m an anti-establishment heretic who is causing doom to our country one individual at a time.
How is this so with all the wealth building advice on real estate, wealth management, and alternative investments you might ask? It all starts with being financially responsible for your own well being. Once you are financially responsible you become less of a puppet to our masters.
DON’T RETIRE EARLY IF YOU KNOW WHAT’S GOOD FOR YOU
Over the years I’ve gotten to know several policy makers. Each one of them has a very vocal view on the tax system. Republicans think it’s ridiculous to have anything other than a 20% or lower flat tax rate. While Democrats think it’s ridiculous that rich Americans are getting away with paying so little. There’s one underlining theme both sides agree on, and that’s the need for tax revenue to keep our country great.
If you retire early two things will happen:
1) Lost government revenue. Let’s say you retire early at 35 years old. You no longer pay W2 related income tax. Let’s say you pay a healthy 30% total effective tax rate and average $250,000 a year until the age of 65. That’s $2,400,000 in federal and state income taxes you will no longer contribute to the system. Now take that number and multiply it by the hundreds of thousands of folks who make such an income and you can see why the government has a real big problem on their hands.
Without the billions in tax revenue from early retirees, defense budgets, healthcare, social security and welfare programs need to be cut. Federal and state jobs could lose hundreds of thousands of jobs as the government is forced to spend within their means. Our country could even become vulnerable to nuclear attacks by the Axis of Evil. Meanwhile, our honorable older citizens might be at risk of not living out their full lives in comfort.
2) Lost government power. Our tax code is the government’s greatest weapon to make citizens conform to their wishes. It makes perfect sense. If people do not pay their taxes, they get fined or go to jail. The number one strategy to retain power is for a politician to raise taxes on a minority and promise to redistribute their wealth to you the majority. The majority will always vote for more benefits if they do not have to pay.
Power is intoxicating. Think about how much corruption there is among the most powerful people in the country. There’s Nixon, Clinton, Spitzer, Weiner, Jackson Jr. and the list goes on and on. Power is like a juicy t-bone in the mouth of a rabid dog who hasn’t eaten for days. If you dare take it away, your hand will get bit off so beware. And just for safe measures, we’ve got the NSA free to track everything we say and do in private. Big brother doesn’t want you to leave the system.
PROPAGANDA TO KEEP YOU EMPLOYED
The government’s goal is to keep you in the system so they can retain their power and your money. The more you work, the more you work for them. I understand how this system might be hard to fault if you are in the system. But take it from me who escaped after 13 years to provide you candid assessment.
Some mainstream propaganda to think about:
* “You need lots of money to be happy in retirement.” -> No you don’t. I’m pleasantly surprised by how happy I am living off 50-70% less income. All my friends who are retired or unemployed happily make do with less as well. We find inexpensive ways to entertain ourselves. When you’ve got Obama and the Fed working for us, there’s really no need to work so hard. You could even survive on just a million if you have passive income.
* “Everyone needs to own a nice home. It’s the American dream.” -> A bigger house means more maintenance, more taxes, more headaches. Buy what you can afford, not what someone says you think you need. Overextending yourself on a mortgage ruined the economy in 2008-2009.
* “Trade in your perfectly fine used vehicle in our Clash For Clunkers program. You deserve to drive a $25,000 automobile.” -> Cars are so well made nowadays that they can easily last over 150,000 miles. This ain’t the 1980s anymore folks. You deserve to drive a $25,000 automobile if you can comfortably pay in cash or make over $250,000.
* “Convert or contribute to a ROTH IRA because you might pay higher taxes in the future.” -> Chances are slim you will be making more in retirement than while you are working. Hello. You are retired and don’t need to save for retirement. Fear mongering for higher tax rates for the middle class is overblown because politicians can’t retain power without the middle class vote. Please read why you shouldn’t contribute to a ROTH.
HELP KEEP OUR COUNTRY STRONG BY WORKING FOREVER
In an ideal world every single citizen finds a job they love to do until they die. Jobs provide purpose to people’s lives and vital tax revenue to bomb the hell out of our enemies. Taxes from half the population help pay for 100% of the population. We must strive to increase the taxation net so that more people pay to help our country.
Who is going to bail out large corporations who pay their executives millions despite horrendous profitability without a steady stream of tax revenue? Unfortunately, too many people work jobs they don’t like, pretending to be someone they are not. When work is the only means for survival, what choice do most people have?
As an early retiree, I selfishly want everyone to work until they die. If too many people start leaving the system, the government is going to start coming after early retirees to make up for lost revenue. Crazy ideas such as a wealth tax or robbing our 401(k)s and IRAs won’t sound so crazy anymore. I don’t want the government to start FOCKing me anymore. I’ve found a multitude of ways to legally pay less taxes as a retiree and I don’t want the tax codes to change again.
Although this site might seem large, it is but a spec in the internet universe. I truly do want every single loyal Financial Samurai reader to achieve financial independence and retire before their knees break and their memories fade. What I don’t want is for everybody in America or in the world for that matter to stop working before 60 years old. We need everybody else who is not part of our little community to keep paying their fair share of income taxes to keep our great nation strong. Let those who already paid their dues enjoy the good life.
Recommendations When It’s Time To Go:
* Negotiate A Severance Package: If you finally do want to retire, never quit your job, get laid off instead. Negotiating a severance enabled me to receive six years worth of living expenses from a company I dedicated 11 years of my life to. If I had quit, I wouldn’t get any severance, deferred compensation, medical benefits, job assistance training or unemployment benefits. I believe so strongly in never quitting that I spent a couple years to write a 100-page book entitled, “How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye.” I’m absolutely certain this book will help you recognize your rights as an employee and break free from the corporate grind to do something you truly want to do.
* Manage Your Finances In One Place: The best thing you can do to grow your net worth is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 28 different accounts (brokerage, multiple banks, 401K, etc) to track my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing, how my net worth is progressing, and where my spending is going.
They recently launched the best Retirement Planning Calculator on the web as well. It takes in real data and runs through thousands of Monte Carlo simulations to output the most realistic scenarios possible. I definitely recommend everybody run their financials through their calculator to see where they stand. Why risk your financial future? There is no better free platform out there that is helping me manage my money. The entire sign-up process takes less than a minute.
Related post: It’s Impossible To Stay Retired Once You Retire Early
Photo: Double rainbow, Ipanema, Rio de Janeiro, FS.
Updated for 2018 and beyond.
Nightvid Cole says
Ah, but if you retire early, you are also (indirectly) consuming less government services, since your overall economic footprint is smaller and you’ve removed one less job from the job market thus reducing unemployment and the need for food stamps and welfare.
So while it is true that the revenue will drop if you retire early, it might be partially or totally offset by the reduction in government spending!
Financial Samurai says
I think I consume more government services as an early retiree. I could never enjoy the parks, libraries, and other subsidized events while I was working.
$200K/year is the ultimate taxable income where folks can find balance.
That is a very important question and to be honest I have not done enough to contribute back to the system here as I should. Indians are by far the RICHEST minority in America. Yes, that includes religious minorities like the Jews. Despite our inherently rich financial common sense, I cannot find too many like minded Indians who would support me on higher taxes. I often find that my thinking is fairly unique even amongst my folks. People are the same everywhere, once they make a lot of money they imbibe the current Republican party’s position on taxes.
My position is simple… If the US govt continues its bullying approach and spends money chasing down lower priority international threats using disproportionate force, I am not going to support more taxes. However, if we take on an improved European model (obamacare inclusive), I am all for higher taxes and will openly profess and defend it. That’s exactly the reason I look up to Warren Buffet.
Oh and by the way… Judging from your site, you seem to like Switzerland. I am pretty sure you know what kind of taxes those people in Zurich and Bern pay. Sure their govt is more efficient in using those funds (they’d rather spend it on civic infrastructure than wars or hand outs to friendly democracies around the world). Germans, French and Swiss still believe is redistributing (yes I said that word) their wealth, so all people who live in these countries can enjoy the benefits EQUALLY. Even their system has issues, but its far better than the one professed by rich Americans (primarily the white republican base) who look for every damn reason not to contribute their fair share.
My wife and I make upwards of $400k/annum (before you claim I am in the 99%) and we are HAPPY Obama is coming after the rich. If you want to live in a civilized nation where rich people pay loads (like France, UK, Germany, etc), be ready to pay up and accept redistribution of wealth so all can benefit. If you dont like it, move to Saudi A, Luxembourg or some Pacific atoll. This is the reality moving forward, accept it or quietly merge into the backdrop with your stash of millions… We will not bother you.
Financial Samurai says
Switzerland has a $79k per capita income and is always ranked in the top 5 happiest countries to live.
Comrade, Socialism could truly mean a brighter future!
Sam… Thanks. Please don’t get me wrong, I wouldn’t be on your insightful site if I did not agree with many of your thoughts. There are many things in common here. That said, you do fall into a unique mix of the American intelligentsia that is working hard to keep its money hidden from being shared or redistributed (or that seems be your primary focus on this site). We will become like Europe and we will have to (despite our best efforts) let it trickle down to the 99%. And I dare say, I agree with that ideology. What is disturbing though is that most of the people trolling your site and commenting don’t see that coming. Many of them hardly travel and never cared to be exposed to the REAL world outside filled with poverty and pain. As long as they are OK in their plush bedroom communities, its all good. A selfish perspective, you say? As a young nation with a VERY young culture and history, Americans do not understand the importance of shared wealth and a common platform for everyone… amongst many benefits, it allows for peace and stability. Their own peace and stability.
I came from a lower middle class family in India living on a few hundred dollars/month to become the top 0.5% in America all within 10-15 years. You can call that real social mobility. There is no social mobility for Americans in America anymore. WHY?? What happened? Today sadly, the culture is all about greed and selfishness (albeit not just in America). Here it is OK for some to earn $100 million a year and fight tooth and nail so they don’t have to share a penny with the bum scraping the last tin can for some leftover, putrid beans. I have NEVER seen any government of any country allow the nation’s top strata of bankers/politicians collaborate to swindle the citizens of that nation of trillions of $$ as we saw in 2008-10.
This is not a sustainable society… it cannot be. A society can grow, there can be social mobility and more people can feel safe ONLY if people are willing to share with others.
Sam – I almost feel like I have totally digressed, however, you should perhaps talk more about finance in a philosophical way. Sure we ought to be careful with our savings and investments, BUT HOW MUCH IS ENOUGH TO BE HAPPY. We from the eastern cultures (India, China, etc…. not Japan) tend to understand this better. Our culture of saving, investing and reinvesting is only predates yours by a few thousand years. Does this ideology make me a communist? If so, you are welcome to call me anything. I call it common sense. Share and create sustainable stability!
Financial Samurai says
I guess the question is: What are you doing about it to make America better? Are you writing additional checks to the government given you make over $400k? Surely you feel a debt of gratitude to America given you made it in 10-15 years from India? Perhaps start a coalition of fellow successful Indian immigrants who were able to make tremendous amounts of money here to donate more money and time to the community? We definitely need more tax payers in America to support society.
Sam… Axis of Evil?? Really? You don’t believe the majority of personal finance and taxation propaganda from the government, but you readily believe in the Axis of Evil BS. Com’n man, you seem like a smart educated man. This is a digression from the personal finance topics, but I can’t help laugh at the how the American govt has its people brainwashed! Any govt, any powerful nation will always be in need for a perpetual enemy… It was the Nazis, then the Soviets, throw in some Vietnam Commis, and now anyone who is brown-skinned (and the countries they come from, Mexico included). Wake up Sam. OK Roth maynot be a good idea, but funding your Govt’s penchant for war with your hard earned money is the WORST thing a citizen can do. I don’t see you complaining about that wastage. And please don’t respond back by saying ‘them terrorists’ are out there to kill us and our ‘freedom’. The real terror to American citizens is the Wall St Government and their Wall St supporters (the Larry Summers, Greenspan, Bernake, Bush and Obama handshake). We are living in a intellectual and common sense bankrupt society that will endorse trillion $ wars but not in rebuilding the education system for their children.
All said and done, to me giving my hard earned money to the govt now (roth) or later boils down to it going to the military industrial complex and Israel anyways. Makes no difference if it happens now or later.
Financial Samurai says
Your first assumption is that I’m smart. Bad assumption.
Second, if funding the government for a penchant for war, then shouldn’t everybody strive to pay less taxes and retire early? That is the bottom line goal for this post whether you can read through the reverse psychology or not.
Random thought here; We have a significant number of college students that are not working here in the U.S., what about considering that when people retire early, they free up a job for the younger generation? We don’t have enough companies and positions to employ all these people… Maybe not retire, but create enough revenue to own a small business and even hire 1 person… free up one job, hire one person…
I do agree with your points, just wanted to contribute a thought.
Thanks for all you do,
Financial Samurai says
Sure. The benefits of getting out of the work force is to let younger force try their hand. It must be frustrating that those at the top stay, limited the opportunities for younger workers.