Is Early Retirement Using Stealth Wealth Gaming The System?

| November 2, 2018

I have been told by some people who I’m routinely in contact with that I’m hard to figure out. I’m always dressed casually, drive some older but uniquely memorable cars, and they know I don’t work in any conventional sense. Yet I am able to live in a somewhat high-cost area. I am seen all over town and at events enjoying the heck out of life. I do stick to what they see as a financially measured routine. Just an average friendly guy on a budget. It works great for me because that’s exactly who I am. I’m not purposely using stealth wealth to fool anyone I encounter. As I get to know people better, I clue them into the ways of early retirement.

For me, practicing stealth wealth isn’t about hiding my net worth from my family, friends, and community, although I don’t talk about it with people. It’s about how I want the government to see me. Based on my taxable income, I live below average median income levels. A type of stealth wealth strategy to live beneath the government tax and benefits radar. Am I gaming the system? Good question. I’m of sufficient net worth to retire early, yet I’m indistinguishable from the lower-income working class. I simply live the same frugal lifestyle that I enjoy and used to reach my early retirement financial target. I just look like most everyone else in this income centric society and its current economic rules.

Is My Use Of Stealth Wealth Gaming The System?

I shamelessly admit that I use stealth wealth tactics to my advantage. As far as I am concerned, I’m just using a different flavor of what the worshiped rich do. I use every legal means possible to pay less taxes and make myself able to take full advantage of qualifying benefits. Some people who I talk about early retirement with feel that some aspects of stealth wealth seems as unfairly gaming the system. I have to explain that “the system” they feel uncomfortable about gaming is based on rules and laws. None is being broken. For some crazy reason, the thought of any of us common folk doing what the worshiped rich do is somehow unethical. I wonder, where do these kinds of thoughts come from? Well, I refuse to feel any shame and here’s why –

Using Today’s Most Worshiped Rich Guy As An Example To Make My Point

This guy proves why using stealth wealth to game the system must be alright with today’s world. He flaunts his wealth. It’s well known what was revealed during the presidential debates. In one of the only dug up tax returns, even with millions in income, he used tax loopholes to pay no income taxes. He famously proclaimed, “that makes me smart”, yet it wasn’t held against him. He obviously received the electoral-college edge to become president and has millions of ardent followers.

So, if the worshiped rich do it and it’s seen as OK, why then is it held against or thought unethical if the working class takes advantage of any tax laws and benefits that are available? Is gaming the system only acceptable for the worshiped rich?

Obamacare – Affordable Care Act (ACA)

Having a decent net worth and doing what it takes to qualify for low-cost Obamacare health insurance is the issue some folks lose their minds over. That’s why I always start with using the most famous, or as some prefer, infamous, of today’s worshiped rich guys as an example.

Yes, if you use stealth wealth strategies to keep your taxable income low enough in early retirement, you can get federally subsidized health insurance. Why is stealth wealth retirees using subsidized ACA healthcare different from when billionaires pay no or very little in income taxes? They certainly receive the same benefits of being an American as the working class people who do pay taxes every year. Answer: It isn’t! If purposely structuring your income to qualify for taking ACA subsidies is being an unethical leech, then so is the billionaire president or any of the many others for paying no or ridiculously low federal income tax on millions in income.

It’s perfectly legal and within the rules to be an IRA millionaire and apply for Obamacare subsidized health insurance. For many people, early retirement before age 65 and starting medicare must find a way to overcome the huge healthcare challenges. If your income amount qualifies, the ACA should be considered without shame, regardless of anyone’s overall portfolio size.

My Early Retirement Healthcare

I’m not on the ACA and I pay $1064 a month (2018) for my health insurance from an employer retirement benefit. I’m one of the dwindling few Americans who after 30 years of service had something like this available. But it has changed to a use-it-or-lose-it for life benefit because of company mergers and is under threat of being cancelled every year. Based on our taxable income, I could get a subsidized ACA silver plan for half what I’m now paying. But the ACA is under constant political threat. So, even though I could save substantially, I won’t give up my retirement benefit. I’m on my retirement benefit healthcare plan until it gets killed. But I see no shame in going to the ACA if anything happens to my retirement health plan.

Purposely Lower My Tax Rate

When working, there was little I could do to lower my taxable income beyond what a 401k and IRAs could do. After that, I was just left with Schedule A deductions. There wasn’t a legal way that I could substantially reduce my taxable income. I paid in taxes nearly what my yearly retirement budget is now. Once I retired and started living off of my portfolio, I had some control over taxable income. My biggest stealth wealth move is looking like I live on a lower income and thus pay little in taxes. It comes right out of the billionaire handbook – Pay the least amount of taxes possible.

Tax Efficient Income Strategy

I purposely use a tax efficient retirement withdrawal strategy to control my taxable income and improve portfolio longevity success. Instead of trying to find tax deduction loopholes as the worshiped rich do, I use a mix of both taxable and non-taxable funds during the year to get my total budgeted amount. It lowers my taxes and is what allows me to be eligible for ACA subsidies if I ever need them. If I were to go on the ACA, I would need even less taxable income from my portfolio and will pay even less taxes. A win-win!

Delayed Tax Payment

Not only do I keep my taxable income low but I only pay the minimum taxes through the year without getting hit with a underpayment penalty. I make the government wait to the last-minute to get what’s fully owed. The amounts I hold back go instead into an interest paying account. Why shouldn’t working class folks, the dwindling middle class, collect interest on their money by saving it instead of prepaying more than they need to? Even if it’s a small interest income amount earned, it’s more than zero. I never overpay through the year. Refund my own overpaid money, interest-free, only when they are good and ready to – Forget that!

The recent tax cuts threw us a few peanuts and gave the big cuts to the worshiped rich and corporations. That alone is reason to think about ways to game this part of the system in our favor just like the folks who dreamed up this new scheme. What’s good for the wealth flaunting elite is good for the stealth wealth early retiree and everyone else.

Living Well Without Shame

Early retirement is all about living well, very well, for the working middle class. There are many things that should be considered. Some are less known than others, like the retirement loophole to get IRA money before age 59 ½ without penalty. Using stealth wealth strategies both in how we live and how we structure our finances isn’t gaming the system. It’s taking advantage of a financially sustainable lifestyle within the existing rules and laws so we too can live well.

Gaming The System? Hardly!

As to those who feel stealth wealth retirees are gaming the system, we need to get over squabbling with each other over the peanuts that the worshiped rich message we are only worthy of. What next, tell us that the Social Security and Medicare we were forced to pay into our whole lives should be cut to cover the growing deficit.? A deficit made worse from the worshiped rich tax cut.

We have the same rights to pay lower income taxes and collect any qualifying benefits as the billionaire ruling class and mega corporations do. It isn’t gaming the system at all. It’s about putting our money towards our retirement freedom, the causes, charities, and the people we care about. And, for me that list has absolutely no worshiped rich folks on it.

I do love being the regular ordinary guy that’s hard to figure out by folks. After decades of paying into the system a higher percentage of my income than the worshiped rich do, I love even more being seen by the government as a lower-income working class taxpayer like most everyone else. I do admit there may also be enjoyment that goes beyond financial in my tactics. Sometimes it’s the little things that we amuse ourselves with that adds a little fun to life.

Note: This article originally appeared at Leisure Freak.


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Category: Personal Finance

About the Author ()

Leisure Freak is a site dedicated to those who are truly passionate about reaching financial independence and early retirement. Not just the traditional definition of retirement, but a new passion-driven retirement.

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  1. Tony F... says:

    Sounds basically like me, liked the intro about driving older interesting cars, an appreciating asset unlike new cars. There are so many ways to live well without throwing money away, for what, usually hyped up nonsense to justify crazy prices. I’m a tight ass apparently, good, your skin ime not !