The Social Case for Financial Independence / Retiring Early (FIRE)

Earl Co
Earl Co
Sep 5, 2018 · 12 min read

The following is a Facebook comment thread in response to this NY Times article: https://www.nytimes.com/2018/09/01/style/fire-financial-independence-retire-early.html?smid=fb-nytimes&smtyp=cur

It will be cleaned up into a proper blog post sometime in the future.

リアルスキ ブラデミル So I find all these “guides” and the promises they have misleading. If you actually look and read all these people espouse, they convince you to pare down your like to living on 30–40k a year for basically the rest of your life. They use their lifestyle to save a ton of money quickly (obviously having immense privilege to be able to do so), then move to a low cost state (usually with no sales tax or could also be a low cost country — see digital nomad) to live on the income from their capital. However, they fail to mention or don’t make obvious certain key things: they usually still keep a source of income (be it owning real estate and getting rent, part time job, or running a blog teaching their method to others!), and they also generally need to find some way to get health insurance as well since that can rapidly bankrupt all those hard earned dollars. At the end of the day, they use their privilege to get to a point where they can detach from society and either stop contributing altogether or contribute at a fraction of the level they are expected to, having extracted maximum perceived benefit. None of these things speak to me but to each his or her own I suppose, as no one seems to even pretend to give a f#ck about the social contract these days…

Victor Jiao Oh right health insurance…

Ryan Hamilton So many claims to address here. Most people are living off of their portfolio sure, but is providing capital contributing any less than someone writing JavaScript to track your cookies or telemarketing a vanity product?

Tons of jobs are complete BS

Victor Jiao ^^^^^ many many jobs are bs esp in America rn

Ryan Hamilton Also not sure what people you are reading. There’s plenty of non-commercial advice on Reddit for example.

/Financialindependence doesn’t prescribe 30–40k necessarily

/R/fatfire definitely doesn’t either.

Victor Jiao Yeah if I make a L5 salary at google I can prob do 80–100k

Earl Co I have health insurance through NY State Marketplace. I pay $20/month. I have a part time job and very minor freelancing, which I use to pay down debts. I live extremely frugally on $1100–1400/month in NYC, and my income from my 3-unit rental property in Albany is $1100/month. I’m very close to FIRE.

Ryan Hamilton Victor Jiao probably 2–2.6 million. Find a tech bf and accelerate it :p

Earl Co None of these “promises are misleading”. You just have to be more creative and willing to sacrifice at least temporarily to achieve FIRE. I’m not saying anyone can do it because I agree it for sure requires privilege especially with regards to access to credit and creative financing, but you don’t need a 6-figure salary to do it. I worked a $55k job and saved 50–60% of that for a year while living in NYC, and used a 0% APR 0% fee credit card (balance transferred $15k for 15 months no interest, just paid off in May) to partially finance the down payment of my investment property (25% down standard requirement for non owner-occupied in NYS). I quit my job in February and can now work for myself because my monthly cash flow equals my monthly expenses.

Earl Co Obviously they keep a source of income, it’s just time-decoupled income (IRS calls it “unearned income” since it’s not from wages/salary which is “earned income”).

Earl Co And in terms of social contract, I provide low-income housing. Easy to get burned if not screening well. Learned the hard way, my tenant hasn’t paid rent for 3 months since she got injured and lost her old job, and Social Services needs to step in.

Ryan Hamilton Earl Co just so I get this straight, you didn’t find a way to use a credit card to purchase a property, right?

You lived on the card and took the money “saved” to purchase it?

リアルスキ ブラデミル Wow! I didn’t realize that ‘providing low income housing’ was a social contract! Do you own 1000s of section 8 houses then? And develop more in good neighbors, giving NIMBYs and zoning laws? And take no tax breaks for it? This is exactly what I’m taking about! Let’s unpack.
My social contract comment was based on several things: 1 — living off capital gains and unearned income generally excludes you from any Social Security or Medicare taxes* (until recently and, still, a very small amount). That money obviously goes to other beneficiaries. I am not defending that system as I don’t expect it to be around when I retire, but it’s the currently decided method to provide a base minimum safety net, which society has not changed. By pulling out 20 or more years early or contributing a lot less over your projected lifetime, you are accelerating its decline. Does your ‘low income housing’ contribution offset this?; 2 — you obtained an education to get to the privileged position to do this. You got there based on multiple factors and contributors. Unless you went to a wholly private school system then a private college and took zero loans, the government/taxpayer subsidized some of your education. The opportunity costs alone set up the expectation that you pay that back in some way (besides the amount and interest only). The general implied soceital agreement is that you are then expected to work in a meaningful capacity to pay back society — whether by going into science and discovering something of value, or going into government to affect policy change, or anything else. Obviously, not everyone’s contribution is the same and the system bets that there will be enough people who do enough of the ‘right things’ to keep it balanced and going. Again, I’m certainly not defending current student loan practices or policy, but you have to remember the system as it was first designed. Think GI Bill. 3 — I love the insurance comment. The ONLY reason that health exchange option even exists is because of Obama and is a completely new phenomenon. Many people do not have access to this or they pay a lot more for theirs due to the state they live in. Additionally, the fact that NYS has such a good system is partially because of their excellent state and city health care system, which is, once again, funded partially by others. I would propose you try Georgia or Mississippi.
I could go on and on but my point is simple: not everything can be reduced to a precise dollar value, and people who try to do this almost always either fail to account for all the hidden costs and/or do not assign any value to moral/philosophical obligations that should be included. Whenever the only things people care about is how to cheat and screw the system, how they can get away with deriving maximum benefit while paying in the least amount of money possible, while enjoying all of the rights and carrying zero responsibilities, society declines that much more. There are a ton of arguments to be made about fixing the system, or not even bothering given its dysfunction and you personally not agreeing with it, so why should you participate. I totally acknowledge all those things. But, at a minimum, you should recognize at least some of the societal factors and contributions responsible for your achievement (s).

リアルスキ ブラデミル Sorry, the 30–40k was assuming a two person household with 1–2 kids. Adjust accordingly.

Earl Co Ryan Hamilton No I straight up withdraw $15k from a credit card to another $0 balance credit card at a different bank, then asked the 2nd bank to send me a refund check for overpayment. Deposit into savings account and sit for 2 months to season.

Earl Co 1) My income is actually taxed as self-employment income, which means you pay double the social security and Medicare taxes.
Capital gains tax is only upon sale of the property, which I haven’t done. To your point, this can be bypassed with a 1031 exchange. You don’t like it? Petition to get rid of it. I’m not paying more taxes than what the government asks of me, but I do pay all the taxes they ask of me.

Earl Co 2) I’m not sure where you’re going with your education argument. Nowhere did I claim to have zero privileges. In fact, I recognize and appreciate all of the privileges this country has provided to me, especially as an immigrant. Silly natural-born Americans don’t know what they’ve got. I owe it to society to become rich and give back as much as I can in the future.

Earl Co 3) You seem to think I’m some sort of economic Libertarian or Republican who doesn’t care about poor and sick people. I love Obamacare, I only wish he would’ve gone straight to Medicare for All. Fuck compromise politics on this topic.

The government wants you to pay your taxes and nothing more. It just so happens they incentivize citizens to do the things they want you to do by charging less taxes for it, and not do the things they don’t want you to do by charging more taxes. Taxes for the middle class are high compared to capital gains tax because the government wants you to start or own corporations and businesses, NOT stay in the middle class. Uncle Sam is literally saying STOP STAYING IN THE MIDDLE CLASS, WE’RE CHARGING YOU MORE FOR IT. I’m just listening to my government. It is my duty to pay my taxes that the government wants from me, nothing more, nothing less.

Earl Co And to reiterate, nothing I do ignores the countless amount of privilege I have obtained, including a large scholarship and financial aid package for attending NYU (including the Pell Grant), a really good public school education funded by property taxes in an expensive school district (more of that school zoning segregation), and even something as simple as my fair skin allowing me to not die at the hands of police earlier in my life. And of course, having a job that provided me with enough income that I was able to access credit and leverage the bank’s money to invest in real estate.

It’s an unfree society. We need to work to make ourselves financially free and help each other along the way. I am willing to teach anyone the steps to get out of the middle class to anyone who wants to learn, for free. I owe society a lot, and I need to be financially free so I can do the work I want to do to give back to society, not to slave away at a corporate job and increase another corporation’s profits.

Earl Co Our reasons and motivations are the same, trust me. Our mindset and methods for achieving our goals and improving society for humanity to achieve its full potential — I go about it a different way, not the way we have been brainwashed to do for decades — go to school, earn a degree, get a job, slave for 40 years, retire and collect a pension and social security. Screw that.

リアルスキ ブラデミル You’re basically making my point for me by simultaneously claiming to love socialized health care but then wanting to minimize any taxes to pay for it. Your perception seems to be one of thinking that you are being efficient and judicious in your finances by doing so and smarter than the government. My point is that your behavior is detrimental to the very system you claim to support, especially if everyone starts doing it — how will it be funded? You have not provided an answer so far to that central point. And I never stated or implied your political leaning.

Earl Co ??? I’m not smarter than the government. I’m doing what they’re telling me to do. Pay your taxes, nothing more, nothing less. If everyone starts doing it, there will be more wealth to go around and people won’t NEED to rely on social security. But also, no way did I ever state I don’t pay social security taxes. But the corporations should be paying for that anyway. Corporate tax is fantastically way too fucking low.

How will it be funded? Do you even know how much the government spends on defense?

リアルスキ ブラデミル And if you think the government tax code, as it currently stands, actually serves any other purpose than serving the well off and their progeny, I don’t even know what to say. The policies and period you are referring to went away A LONG time ago.

Earl Co Your perspective seems to be “slave for a corporation and let them extract wealth from you, then pay as much taxes as possible”. I’m not trying to fund an unnecessary national defense system that is over 50% of discretionary funding, if you want a more specific reason for not paying more taxes than is asked of me.

Earl Co I don’t disagree that the tax system is set up to benefit the wealthy. It’s fucked up.

Become wealthy, and along the way do everything you can to change it. Or give back to society directly, through charity. Charity is 100% tax deductible after all.

Never did I support offshore bank accounts and true cheating of the system. All I advocate for is for people to work harder and smarter and sacrifice temporarily to elevate themselves to get out of poverty and by extension the middle class.

Earl Co リアルスキ ブラデミル You’re a good person. I think most people are. It’s time we stop working for an economic system that doesn’t give a shit about the poor and middle class like it used to for decades after the New Deal. And let’s be honest, that system only cared about white people.

One of my mentors from grade school, Angela Briana Blair Tatem, started Wealth Education Exchange to help people manage their personal finances and achieve financial independence. Such good work. I believe a major contributing factor to why the poor and middle class stay poor and middle class is because they lack the privilege of a good financial education. It’s not part of the high school curriculum, because high school teaches you to go to college, get a job, and slave for a corporation, instead of working for yourself and becoming self-reliant such that you can give back to society in the ways that utilize your skills, expertise, and connections maximally.

Access to credit would be nice too. That’s why the FHA, VA, and USDA loans exist, among others I’m just learning about, including 203k loan to help buy properties in distress and fund renovations (making existing housing livable again).

リアルスキ ブラデミル Earl Co last point then I’ll move on: what you advocate now is very different from your original argument. To summarize, my position is that the majority of FIREs predominantly go from full time, professional employees with high salaries to part time or no employment, funding a significant portion of their livelihood with proceeds from capital. This inherently reduces the tax base in general and, in my specific example, entitlement proceeds especially. The fact that there are many potential individuals doing this or interested in doing this who are 30–40 hollows out the base for decades. Despite this, their use of societal resources is not (much) lower and they do not view their choices as deleterious or having societal consequences. I don’t disagree with what you recommend but that was not in your original argument. And I never once advocated nor even used the word ‘corporation.’

Earl Co The argument also exists that people should not be owning real estate, only collective society should.

While housing is a human right, people are needed to take care of it so it doesn’t deteriorate and fall into disrepair. That alone is hard work, and at the moment the most obvious incentive for people to take care of property is to give/assign it to them in a way such that they have “skin in the game” and a potential future reward for doing the work necessary to upkeep any property, whether they live in it or rent it out to others.

A socialist friend of mine is trying to achieve financial freedom through real estate as well, and she recognizes this point but morally speaking, all U.S. land is stolen from the Native Americans so reparations should be made to them and land ownership doesn’t really matter if it’s all stolen anyway.

Earl Co リアルスキ ブラデミル you make a very good point regarding the tax base, I understand. It’s part of the reason why I’m trying to FIRE without relying on capital from a high salaried job. That would make it SIGNIFICANTLY easier, no doubt. But if I, an immigrant from a poor family, can do it, most people should be able to as well.

If everyone in the upper middle class who paid high taxes started doing the things we’re doing more, perhaps at some point things like social security will dry up. But the system is fucked up anyway and was never set up to last and needs to be funded some other way (hence my use of the word “corporation”). I accept that my contributions to social security will not pay me back when I need it, so I am setting myself up to never need it.

To answer your question of “once everyone starts minimizing their taxes, the tax base will dry up, how will we fund socialized healthcare and all the good things?” Perhaps try taxing a different set of people, instead of the middle class (hint hint: higher taxes on capital gains, corporations, and the ultra rich).

Earl Co

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Earl Co

Computer Engineering at NYU-Poly Class of 2016, tech guy, entrepreneur. Don't just be a number, make yourself count.