Wednesday, October 17, 2018

The System Calls...

You can't buck the system, Mr. Money Beard!

In a recent article on MSN Money, Mr. Money Beard makes the big time by attacking Sooze Orman. Actually, his comments aren't directly attacking the Sooze - the MSN people really tacked that on as a headline in order to generate clicks.

The issue at hand was apparently Ms. Orman claims you need five million dollars in the bank if you want to retire before age 60, which is, of course, preposterous.   That level of wealth would put you in the top 1% of the country, and yet people retire all the time with far less - often less than two million dollars - if you can believe that!

Apparently this set off a shitstorm on something called the "FIRE" subreddit on Reddit, which I don't follow, because (a) I don't follow acronym nonsense ideas, (b) stupid formulas for retirement rarely work, and (c) Reddit blows chunks - it is just a haven for shills and con-artists trying to warp your opinion to their own advantage.   Stay off social media of all sorts - that is the best "advice" anyone can give you, financial or otherwise.

Today, a follow-up article claims that Ms. Orman is right - and another financial expert (Mr. Financial Kung-Fu) says that the $5M figure is about right, as you'd need $200,000 in after-tax income to live in places like New York, San Francisco, Boston, etc. with a mortgage and a family to support.

What fucking planet are these people from?  Oh, right, planet media, where a "normal" life includes a multi-million dollar home in posh suburb in a major city, a string of lease payments on a $100,000 SUV, and private schools for the kiddies.   Isn't that how everyone lives these days?

Perhaps not.  Since I am childless, that knocks down how much I need to retire on.  But even if I had kids, by this point in my life, they would be at least 30 years old and hopefully not living in my basement (my parents didn't permit it - neither would I).  So I am not sure what these "experts" are talking about there.   And as for living expenses, well, having a "paid for" house means my monthly carrying costs are about $1000 a month or so - on par with the cheapest apartments to rent these days.

And let's not forget the equity in the house.  Yes, I know, financial "experts" claim you shouldn't include that in your net worth.  But I disagree, as it is real wealth, and you can tap into it.  My plan is particularly simple.  We still own a Condominium in Alexandria, Virginia, worth about $170,000.  We paid $38,000 for it decades ago and depreciated it on our taxes (just like Jared Kushner, only on a much smaller scale - and yes, this is legal) so our gain on the sale of the condo would be the full $170,000.  Big tax problem, right?

Um, no.  You see we plan on selling it (and will be forced to do so when the complex is torn down to make way for a new high-rise).   We will use the proceeds in a Starker Deferred Exchange to transfer our "basis" to a new property in a retirement community in Florida.  We've identified several in that price range in over-55 communities that would allow us to fix up (sweat equity) and rent out (retirement income) the property for several years.

When the time comes to downsize, we can sell our current house for about a half-million, tax-free, as it is our personal residence.   We can then move to the rental property and live there, using the half-mil from the sale of our current property to live on (along with other investments, social security, etc.).    We avoid paying taxes on the rental property entirely as it becomes our new personal residence, and if we sell that later on, it is also tax-free.

Pretty sweet deal, no?   And yes, all perfectly legal.  I know this, as I have done it before.

But getting back to the issue at hand, why is the financial press always selling this idea that (a) you can never retire, (b) you need to save a staggering sum of money to retire, and (c) get back to work you lazy sod!    The reality is, of course, that people retire every day, and what they retire with is what they ended up with - often less than a million dollars, often far less than this.

Mr. Money Beard makes the rather rational and dangerous argument that working for a living should be something you do in order to achieve a goal. And enjoying life is more important than accumulating wealth. He points out accurately that many of the financial news sites are full of paranoia and fear - promoting the idea that no matter how much you save for retirement, it will  never will be enough.

And by doing this he is going against the system, and the system will come knocking on his door and make him an offer he can't refuse.  "Nice website ya got here, Mr. Money Beard.  Shame if something happened to it, right?"  They already got to Sooze Orman - it's only a matter of time before they get to Mr. Money Beard.

If you peruse the articles on MSN Money on any given day, they are chock-full of fear and paranoia. It seems every day there's another article as to why you should work until 70 and not claim Social Security early.  You never know when you might need that money in retirement so you should just keep working until you drop dead.  And no matter how much you managed to save for retirement, there's an article questioning whether it really is enough.

And then again there's a list article telling you about the 10 biggest mistakes to make in retirement or other articles telling you about the 10 best cities to retire - most of which have a cost-of-living which is astronomical.  New York City or Paris are often cited in these articles - practical choices, no?

The financial press never promotes articles about people living simple lives and enjoying themselves. And this perhaps is by design.

As I noted in an ealrier post, our capitalist system has a certain amount of insane genius to it.  People willingly sign themselves into debt for a new Camaro so they have a shiny car to drive to work.  Then they're obligated to work for another five years to pay for the Camaro.  Most people assume this is a perfectly normal thing and never question the validity of it.

And thanks to this system, millions upon millions of people are obligated to go to work everyday in order to pay for shiny things in their lives.  If we had people suddenly deciding to reject materialism and live their lives wholly and fully, the entire system would fall apart.  What motivation does the waiter serving you your food at a restaurant have to do his job if he isn't tied down with a bundle of debt and student loans and mortgages and car payments?

Like I said, I think eventually they'll get to Mr. Money Beard, just as they got the Sooze.  She started out giving sound financial advice to people - telling them to keep their cars for 10 years or longer and to spend less money and save more.  Then Buick offered her a gig as a spokesman for their overpriced automobiles. And then Sea-Ray - one of the makers the most overpriced boats possible - hired her as a spokesperson to sell luxury boats as a rational lifestyle choice for frugal people.

And suddenly instead of pushing arguments for frugal living, the Sooze is running a television show called "you're approved" where people call in begging to buy consumer goods.  And she tells them, like Santa Claus, whether or not they're approved to purchase the particular bling in question. She even named her new boat - a Sea Ray of course - after the television show.

The only question that remains to be seen as well how much money they will have to throw at Mr. Money Beard before he changes his tune as well.  The system will come a-calling, with an offer he can't refuse!

My advice to him - take the money!