[USER]

So we are very similar to many of you in that we live on a pretty low budget and very heavily contribute to retirement accounts as part of our journey to FI.

This lowering of our AGI has benefited us by making us eligible for various financial benefits, the most obvious being lots of tax credits and breaks (EITC, CTC, savers credit, etc) giving us a very healthy refund each year.

But we have also qualified for other AGI based benefits over the years like Medicaid (covered pregnancy x2), childcare grants, WIC, and we in the future will be eligible for full Pell grants and free instate tuition for any of our kids at flag state university.

Some of the qualification ranges are wildly higher than I would have imagined, and I never would have known without having searched it up.

For example, child Medicaid is AGI of 213% FPL!

As financially savvy people, it feels silly to not take advantage of anything we legally qualify for (as you better believe every business owner, corporation, non-profit and university are), but at the same time I feel bad because societally we are told we should feel bad “taking taxpayer money”.

Are we wrong for utilizing these? If you were eligible, would you pull on every available lever to help you move the needle until you were no longer eligible?

Why are some programs more acceptable to “hack” (loan forgiveness, ACA subsidy, Pell grant) than others?

I wish I could tell more people about these opportunities, but I am too embarrassed by the social stigma of it to be more open about it. (It is why I’m posting anonymous.)

(At the end of the day, I rationalize away any guilt by remembering we don’t send our kids to public school, saving $$$$$ of state and federal funds each year.)

[Starla]

I know they made some changes with the FAFSA, but will you qualify for full PELL grants and free instate tuition with a high net worth?

I know it did used to be based on net worth, but now I’m hearing it’s based on income — so that could be the case.

[Katie]

We get EITC, CTC, and Savers but have never done Medicaid or WIC. Kids are not college age, but I need to start researching that subject.

The difference for us is that my husband’s income is VA disability, which is not taxable, but is considered for other programs for which we don’t qualify.

I am completely honest but take discounts for which we qualify. There’s no reason to feel bad.

[Christopher]

Just know that there’s no bottom to this sort of thinking. Are you wrong for collecting interest on municipal bonds that are paid by property taxes – people get evicted if they cannot pay after a time.

Is it wrong to pay taxes that subsidize weapons and war? A case can be made to tell yourself whatever rationalization you want.

Subjecting yourself to the morals of internet randos is a path to madness and self loathing.

[Shannon]

Idk. As long as you’re not taking something that would be denied to someone else because funds run out, I say milk the system for everything you can.

That’s what the billionaires and businesses do as you mentioned

[Joel]

I have no problem with you taking advantage of any program offered to you. But I wasn’t in the same boat. When I was working I made good money and I could only exclude my 401(k) contributions from my income.

During the accumulation part of my FIRE journey I was always at least in the 24% bracket and there were a few years where I slipped into the 32% bracket and paid NIIT taxes on some of my investment income.

I’m FIREd now. I’m keeping my AGI artificially low, so that comes in around the 250% of FPL threshold needed to claim the ACA Cost Sharing Reductions. But that’s not what I’m spending.

My budget is a good deal more than that.

And since I’m no longer married and my kids are grown, those other financial incentives are not on the table for me.

As for any guilt about taking ACA subsidies? Well, I’m paying almost as much after subsidies as I did when I was on COBRA after I FIREd. And that’s for a much inferior plan. I don’t think there’s a good excuse for that.

As far as I can tell ACA insurers are gouging the government for the subsidies and pocketing them as pure profit.

It seems like not playing the game at not letting the Treasury Department pay these subsidies is you playing the sucker.

Besides, I paid in a few grand in NIIT while I was working, so I actually did help subsidize some of other people’s ACA premiums during my working years.

In some respects I’m just collecting on what I paid into the system. Of course after some time this year I will have “collected” all of the NIIT I would have paid in, so that’s kind of a silly argument.

[Ron]

Also keep in mind that the US can be very expensive if you have a medical emergency, live in a high income area, etc.

Programs are designed not just to help the poor, but also the middle class.

[Scott]

I don’t see much wrong with (legally) managing one’s affairs to maximize their well being. If you want to pay it forward you can support charities that support cause X (whatever cause X resonates with you).

The Supreme Court long ago held up a case where Judge Learned Hand said “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.

[Holly]

My guess is that these programs are going to be dismantled sooner rather than later, so take advantage while you can.

[John]

A certain government efficiency person would call such actions parasitic while his firms collect about $3M a day in government subsidies…

[Kami]

When you have a bunch of money in retirement, you can not qualify for the big tax refund with kids.

I feel like the cutoff is like $12k in retirement or something.

[Megan]

If you’re taking advantage of these programs intended for people in poverty and/or facing life changing circumstances, then I hope you’re voting for people who support these “opportunities”

[Emily]

As a single mom, that is working like crazy to afford life and stash for retirement and had to advocate like crazy to get my diabetic child approved for Medicaid as a secondary insurance to help cover expensive life saving medicine/equipment- this is appalling and a slap in the face.

This is also probably the reason they will be heavily looking at Medicaid recipients and funding will be cut

[Kristin]

Even if we put the moral and ethical part aside… how in the world does a family live on 2 x fpl and have enough money left to “heavily contribute” to retirement accounts?

I understand that you’re not paying for insurance and you’re getting food, childcare and tuition subsidies, etc, plus all the tax credits you mention… but, I’m having a hard time understanding how you’re really winning in this game in the long run.

I would love to know more about your situation. How many kids do you have? Are you a one or two earner home? Are you self-employed or do you work for a company?

Do you own your own home? Vehicle(s)? How old are you?

I’m having a really hard time wrapping my mind around a way that you could be earning enough money to “heavily contribute” to retirement while simultaneously having a low enough AGI to remain eligible for all the programs you mentioned.

And… what happens when the kids age off these programs and you start paying for your own health insurance and lose some of those tax credits and assistance programs?

Or, if eligibility requirements change and you no longer meet them while you’re raising your children?

Put the moral and ethical piece aside and explain to me how not maximizing your earning potential during what should be critical earning/saving years aligns with FI goals.

I suspect that this little game you’re playing with the system now is one you will pay for in the future.

[Rick]

Conditional morality afflicts many people and worse they sometimes project it on others.

You should pay more taxes. I wouldn’t use that program even if I qualified for it so why should you. Stuff like that.

I lean legal is legal and let the morality police feel as bad as they want but just keep it to themselves.

[Ron]

If you believe that taxes and credits should all be on an asset based system and not yearly income, and that yearly income criteria should be lower, vote for someone who believes that.

When the system changes, change your behavior.

Before then do what benefits you with no guilt.

Heck, who’s making you feel guilty? I do all the things you do and have posted and commented about them here with nary a word against over the years.

[Mia]

It is acceptable and even applauded for businesses to do the same but when it is an individual, they are demonized. It’s the bootstraps mentality.

As the co-CEO of my family, I feel like being as strategic as legally possible is completely ethical and my responsibility is to my shareholders (kids).

[Chris]

I know about some of these but child care grants and wic I thought were based on gross income? Perhaps it varies by state? Since you are anonymous can you show us exactly what you mean?

Gross household and agi # of people?

Also, what state?

[Ryan]

Not sure I would spend mental energy worrying about the “morality” of legally qualifying for and using government programs available to you.

It’s the system society has collectively voted for over the decades.

Pay it forward by helping out your family, friends, local community, charities, etc.

[Kiratiana]

There is not a technical problem with this. But the social issue is that people who actually need the help, are actually looked down upon in our society.

América is a very uneven country in terms of social benefits because of the states.

For example, in Illinois as a disabled person, there are so many benefits you can qualify for. BUT you have to have knowledge and savvy to even know how to apply for and get these benefits.

That’s what makes you different from the person who probably needs it the most.

You have the education and savvy to know how to qualify for and get these benefits. Unfortunately, the typical impoverished person or disabled person probably just doesn’t even have the education or research skills to wade through all the potential benefits.

I guess what I’m saying is your are using your privilege to get something for people reserved without privelege. And those people end up being looked down on by society.

But isn’t this country supposed to take care of us?

You really can’t win in the US.

[Author]

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