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.