After doing some more research I’ve found a few snags and caveats in the first-draft tax-free retirement plan I posted earlier this month. These are the most concerning ones:

1. I planned that in a couple of years, I would drop my adjusted gross income considerably for a few years because I will have fewer tax credits I can play off against taxable income to get my tax rate down to zero. This is fine from a spending point of view, because I will be able to tap some additional income that does not appear in AGI. However, this threatens to push me out of the Covered California subsidized health insurance marketplace and onto its health-insurance-for-poor-people plan (Medi-Cal). If that were to happen, I would lose my high-deductible health insurance plan and would no longer be able to contribute to a health savings account. That would eliminate a nice tax deduction and also a good tax-free way of paying for health expenses later on in retirement, so I would like to avoid that if possible.
2. Apparently you cannot use any portion of your required minimum distribution from an IRA to make Roth conversions. I hadn’t accounted for that in my original plan.
3. The “combined income” factor that determines how much of my social security benefit becomes part of my adjusted gross income, and so potentially my taxable income, does not adjust for inflation under current law. Currently, if my CI is below $25k, none of my social security is taxable; if it is higher than that but below $34k, 85% is taxable; if it is higher than that, 100% is taxable. But those thresholds are set in stone by current law; if nothing changes, they will be the same in 2037 when I turn 70. In order to keep my CI that low, my spending budget has to stay low to match, but money won’t go as far then, so that represents a significant hit.
4. Oh yeah, about that social security: Currently, the social security program is scheduled to start running short of money in 2032, before I plan to start taking benefits. If nothing is done to fix this problem, benefits could drop to about three quarters of their currently-anticipated values.

Here are some thoughts on how I might address these conundrums:

1. (Low AGI=no HSA) There are a few options here:
   • I could just take the hit and go on Medi-Cal. The loss of the deduction would mean I would withdraw less from my IRA during the years when I had intended to fund the HSA. Having less money in the HSA would mean I would have to pay for medical expenses from IRA withdrawals or from social security in my early 70s instead. Neither of those things breaks my plan, but it makes my zero-tax budgets slightly tighter.
   • I could let my AGI climb out of the zero-tax zone and take the federal tax hit. After all, I’ve been owing (and neglecting to pay) self-employment tax for years. If I were to owe and not pay a smaller amount of income tax, that would for practical purposes amount to the same policy I’ve long been operating under.
   • I could withdraw enough money from my IRA to raise my AGI sufficiently, but then spend that extra money on courses at the university up the street. That way I could qualify for the federal “Lifetime Learning Credit” with which I could eliminate any tax due on the higher income. That university has a good set of courses on artificial intelligence in its computer science department, and on the ethics of technology in its philosophy department, which both seem like good bets for positioning myself to be more capable to contribute meaningfully to humanity’s attempts to weather the incoming crisis. This currently seems like the most attractive option.
2. (RMDs and Roth conversions) My options here appear to be two:
   • Stop making Roth conversions when I hit age 75 and have to start taking RMDs. Turns out that’s no big deal and doesn’t really change my plan much at all.
   • Take additional IRA withdrawals over and above the RMDs in order to make Roth conversions. I don’t think this is worth doing.
3. (CI not indexed for inflation) I don’t have a plan for how to deal with this. The ramifications do not begin until 2038, which is far enough out that I assume the law will change in some meaningful way by then, whether for the worse or the better, and I’m better off waiting to cross that bridge when I come to it.
4. (Social Security unsustainable) If this happens, this will result in slimmer budgets for me during my social security years (after age 70), but nothing unendurable. However, as with the previous item, I assume that by then the law will have changed in some way. The politicians in Congress aren’t about to let every voter on social security take an abrupt 20% cut without trying to cook the books in some manner. Someone will have to get screwed to prevent that from happening, and I might very well be one of the someones, but it probably won’t be in the manner this scenario suggests.

OK. I’m getting pretty tired of running all these numbers, but I wanted to be extra careful to get things right. With much of the above (and several other smaller tweaks) incorporated into my game-plan, here’s how it’s shaking out now:

I have, to my surprise, suddenly retired.

This has various ramifications, mostly pleasant ones, but among which is that I need to retool my tax resistance strategy. That strategy has until now involved avoiding or resisting taxation on earned income by means of things like tax-deferred retirement contributions. Now I have to prepare for a future without any earned income to speak of, in which I will instead be drawing down those tax-deferred accounts.

This is my first draft of a game plan for the coming years. There are a lot of moving parts and a lot of uncertainty, and so it’s been challenging to draw this up.

I decided not to adjust numbers for inflation. I figure that allowable HSA deductions, standard deductions, Social Security, etc. will more or less track inflation and so it will be a wash as far as my calculations are concerned. I also assume a 3% real rate of return on invested money, which I understand is considered to be on the conservative end of what is likely (but who knows?).

The further my plans go into the future the more unreliable they are because of all of the unknowns (what will the market do? what will Congress do about Social Security? will artificial intelligence turn us all into paperclips?). For want of a way to meaningfully plan for possible scenarios like the collapse of the U.S. government, the global dominance of artificial superintelligence, and so forth, my scenarios instead assume that the future will be more or less a later-to-arrive version of the present, in which I am older but playing essentially the same game by the same rules. I’m posting this here today in part so I can look back at it and laugh later.

The biggest unknown, or one that looms large in my mind anyway, is how long I’ll be around to enjoy retirement. One can’t count on even one more day, but one ought to plan ahead anyway. The typical life expectancy for someone my age is something like 81. But my parents are both alive and on the cusp of 90 and three of my four grandparents made it into their 90s too, so I think I should be prepared for the possibility that I may stick around longer.

My goal is to have a comfortable and secure retirement (and hopefully a long and healthy one) and to continue to successfully resist funding the U.S. government. Can I do that if I retire today?

Just about every year since I started resisting, I’ve put aside 40–50% of my income into tax-deferred retirement accounts and a health savings account (HSA). In years when my income was lower than it needed to be to avoid the federal income tax, I’ve transferred some of the tax-deferred money into a Roth IRA, taking that amount as current-year income while staying within the 0% tax bracket. A couple of years back I stopped using the HSA to pay for health expenses and started using it as another retirement savings vehicle.

Early Retirement: Ages 57½–59½

So I start with a pretty good hunk of change in retirement accounts. However, I’m only 57½. I cannot begin to tap these accounts without penalty until I turn 59½, with a couple of exceptions:

1. I can withdraw from my HSA to pay for past health expenses I had paid for out-of-pocket (yes, I saved the receipts), and for current health expenses.
2. I can withdraw from my Roth IRA any principal I added at least five years ago (but not any gains, or anything I added more recently).

So for the next two years, before I turn 59½, I need to live off of my current cash savings (~$24k) + about $2k from my HSA + about $38k from my Roth = $64k. Can I do that?

My current spending runs to about $27k per year in rent, food, etc. (not counting health expenses for which I could tap the HSA). $64k gives me twice that and then some, so that feels safe to last two years.

I have brought in only about $15k in earned income this year. But I was making HSA and IRA deposits as though I were going to earn a standard year’s income. As a result I have way more deductions than I need to shield that much income from income tax. This gives me the opportunity to generate more tax-free income by doing another Roth transfer this year, probably to the tune of $43k or so. That will help later on.

Pre-Medicare: Ages 59½–65

When I turn 59½ I can start drawing down both my tax-deferred and Roth IRAs as much or as little as I’d like. (Starting at age 75, required minimum distributions may change this calculus a bit; I’ll get to that later.)

If I pull no more than $22k from my tax-deferred IRA per year, and deposit the maximum (currently $5,400) in my HSA, this will result in an adjusted gross income less than the standard deduction, resulting in no taxable income. (This also ensures that I remain eligible for Covered California’s high-deductible health insurance plan, so I can make HSA deposits.) Because none of this income is considered earned income in the current tax year; there is also zero self-employment / social security tax. If I supplement that ~$16k spending money with another $21k from my Roth IRA, that gives about $37k in spending money.

For the next several years I hope that the IRS will continue to drop the ball on my past tax debt, letting it fall off the statute of limitations cliff year after year as they have for several years now. When they do this, I typically celebrate by making a charitable donation equal to the amount of the successfully resisted taxes. I hope to keep doing this, but this means subtracting $4–$6k from that $37k of spending money. But that still leaves me comfortably above my $27k budget, so I think I’m okay here.

Medicare Kicks In: Ages 65–69

When I have to join Medicare at age 65, I lose my high-deductible health insurance plan and can no longer contribute to my HSA. Medicare also has substantially more expensive premiums than my current plan. As a result, my healthcare expenses rise, and an important tax deduction vanishes.

This will be a good time to start tapping my HSA to pay for these extra expenses.

On the up side, my standard deduction increases to the You’re Officially Old level.

In 2037, if things go well, the last of my tax debts will be eliminated by the statute of limitations. I’ll make my usual charitable donation and will have no remaining federal tax debt.

Things are a little iffy toward the end of this 65–69 range: it’ll be touch-and-go depending on the market and on how frugal I’ve been in the previous years, but I may exhaust my Roth toward the end of this period. If so, I have options. I might tap the HSA to reimburse for past medical expenses (if I still have any stored up), or I might have to take more out of my tax-deferred IRA, which could put me into taxable income territory. Another option would be to apply for Social Security earlier than I otherwise planned to.

What if the IRS Seizes that Tax Debt?

The IRS has failed, for many years running, to collect taxes they say I owe them. But this isn’t because I have some great ninja asset-hiding scheme. I haven’t buried my IRA in a hole in a tax haven or anything like that. I’ve just been overlooked by a dysfunctional bureaucracy. That could change at any time.

The total amount I owe at this point is a little under $90k. If the IRS seizes money from some account of mine, that may have additional tax implications. If they seize it from a tax-deferred retirement account or from my HSA, the amount they seize would count as potentially-taxable income in the year it was seized. (I think early-withdrawal penalties are waived in such a circumstance, but if not, that too might be an issue if this happens before I turn 59½.) If they seize it from my bank account or from my Roth, that leaves less in those accounts for me to use to offset potentially-taxable income.

In short, such a seizure could throw a wrench in my plans, and I’d have to rejigger things.

Because it’s difficult to predict if, when, or in what manner this might happen, I haven’t tried to account for this in my scenarios. But it’s a Sword of Damocles that dangles over these plans and could disrupt them a bit.

One thing I’m unsure about is whether the act of beginning to draw down my retirement accounts will make those accounts more salient to IRS enforcers. I think they tend to be reluctant to seize money from retirement accounts; but this may be more the case when those accounts represent retirement savings than when they represent retirement income. It’s possible that beginning to take IRA withdrawals may trigger a levy.

Of the ~$90k in tax debt, about a third of it is interest and penalties added by the IRS to the amount I originally did not pay. If seized from me, I could apply to the War Tax Resisters Penalty Fund for reimbursement of these penalty-and-interest amounts. The fund has a good record of reimbursing requests like these, but it has not seen many requests in recent years, and a request for ~$30k would be an especially large one, so it is uncertain how much reimbursement I could expect from such an application. I am not sure whether such a reimbursement would officially be considered taxable income or more along the lines of a gift.

Social Security Kicks In: Ages 70–74

When I hit age 70, I must begin taking Social Security (I could start earlier, but I think it is to my advantage to wait). In current dollars, my expected benefit is about $35k/year. (The Social Security trust fund is expected to give out by then, which could mean a reduction in benefits if Congress has the guts to try that. This would change some of the numbers that follow, but not the basic strategy.) Social Security benefits are taxable, but only according to a strange formula:

• If your “combined income” is < $25k, they aren’t taxed at all.
• If your “combined income” is between $25k and $34k, half of your Social Security benefits become part of your adjusted gross income.
• If your “combined income” is > $34k, 85% of your Social Security benefits become part of your adjusted gross income.

So my best bet for avoiding federal income tax entirely is to keep my “combined income” below $25k. What is “combined income” you ask? It seems to be whatever would be my adjusted gross income anyway (at this point: what I pull from my tax-deferred IRA, plus any Roth conversions) plus half of my Social Security benefits.

Naïvely, if I were to continue to withdraw about $20k/year from my IRA, my “combined income” would be about $38k, which is too much. So what can I do about that?

There’s a trick called “qualified charitable distributions” that allows retirees after age 70 to transfer money directly from their tax-deferred retirement accounts to certain types of charities; when they do so the amount of the transfer does not count as income. So if I get $35k in Social Security, withdraw $7k from my IRA to supplement that, and donate $13k to charity from my IRA, the numbers look something like this:

• Spending money: $35k + $7k = $42k
• Combined income: $35k÷2 + $7k = $24.5k
• Adjusted gross income: $7k

So I remain tax-free despite the new income source, and indeed my spending money budget can go up. If I stay frugal, I can even use some of this extra money to rebuild my Roth by means of Roth conversions. That may come in handy later on when my HSA runs out (around age 77 according to my projections).

Social Security can be seized by the IRS to satisfy tax debt. (Typically only 15% of your check can be seized, but more can if The Man decides to make a big deal about it.) However if things go well I won’t have any remaining tax debt by the time I turn 70, so this won’t be an issue.

You may wonder why I plan to withdraw anything at all from my IRA at this point, since the Social Security benefit by itself wouldn’t be taxable and yet would be enough for me to live on comfortably. The answer is that I have to withdraw some of that money eventually — see below — and so there’s no real disadvantage to doing so at this stage if there’s plenty to be had. If I don’t have any spending needs to justify the withdrawals, I can take them in the form of Roth conversions and charitable contributions. If the market tanks, I can leave my IRA alone and coast on Social Security for a while.

Required Minimum Distributions: Ages 75+

At age 75, another rule kicks in: I must take a certain amount from my tax-deferred IRA every year whether I want to or not (up to now, whether and how much to withdraw has been entirely up to me). The amount I have to withdraw is based on the amount in the account and my age. Under the projections I’m working with, this will have the effect of slightly increasing the amount I withdraw from my IRA.

But because of the “qualified charitable distributions” trick described above, I can simply increase my charitable giving to match and thereby continue to keep my combined income and adjusted gross income numbers below their respective lines.

I’ve run the numbers through 2068 at which time, if I am still alive and kicking, I will celebrate my 100^th birthday. Should I be so lucky, according to my best-guess estimates, I will have spent about $2.3 million in today’s money on my own modest upkeep during retirement, will have given about $600k to charity, and will still have a little gas in the IRA tank in case they’ve invented a miracle longevity pill or I want to leave a bequest somewhere or other. When I look at it that way, I feel astonishingly wealthy and fortunate (though fortune may have its own ideas for my future). Yet, when I describe my frugal retirement strategy to others I not infrequently am met with a response that suggests I’m consigning myself to sad poverty or something like that.

What if I have unusual expenses I haven’t anticipated here, e.g. I need long-term care or I want to take a bucket list vacation somewhere fancy or I want to replace my failing body with the latest consumer model robot parts? Well, I do have a considerable extra room in my potential budget if I’m willing to step over the taxable income line. If in some year I need to spend thousands of dollars on some emergency (or splurge) expense, I can withdraw a little extra from the IRA or I can neglect to make a charitable donation that year. This makes me vulnerable to income tax, but I can always just neglect to pay the tax and try my luck against the IRS enforcement bureaucracy, which has been a good bet thusfar.

Of course, nothing will turn out exactly like I’ve planned. Trying to project things 40 years into the future based on the current financial economy and political economy and my current lifestyle needs is nuts. But as a back-of-the-envelope calculation to help me figure out whether now is a good time to attempt to slip into a secure retirement and continue to resist, it’s been a good exercise and has given me the confidence to go ahead. It’s also helped me to plot out some strategies I can use along the way (if I stay alert for changes and remain flexible) to make things go easier.

For years I’ve been idly toying with the idea of trying to make a richer, more accessible version of Thoreau’s Civil Disobedience for today’s reader. This month I finally got around to implementing it.

You can find it here: Civil Disobedience, a thread by @hdthoreau.

It presents the essay as though it were a social media thread, and enhances it by adding “replies” from many people who have commented on the essay over the years — presented as though these commentators were reacting to it and to one another all around the same time. It flattens time, or cuts at a right angle through time.

Among these replies are also excerpts from Thoreau’s journals or his other published works in which he elaborates on some of the same themes he brings up in Civil Disobedience.

A couple of (ostensible) “bots” also contribute to the conversation — wikibot chimes in from time to time to explain some of Thoreau’s references that may no longer be common knowledge (who were Samuel Hoar and Daniel Webster anyway?), and biblebot gives you chapter-and-verse whenever Thoreau makes an allusion to something in the Christian bible.

I think this will be useful to people who want a richer, higher-dimensional experience of Civil Disobedience.

There’s a new IRS Data Book out, so I can update these numbers on enforcement activity:

When tariffs rise, tariff evasion becomes a useful way to boost profits or to undercut competitors. Firms that can figure out how to evade tariffs or to find suppliers who evade their tariffs are at a great advantage. And so it’s no surprise that, right on schedule, tariff evasion techniques are thriving under the tariff-happy Trumperist regime.

This also has the salutary effect of encouraging the survival and growth of those firms who are most willing to encourage and to engage in federal tax evasion, at the expense of tax-compliant firms.

A landmark of social psychology research was “The Milgram Experiment,” but a new look at the audio tapes and other evidence collected during that experiment suggests that we may have been interpreting it incorrectly. Here is the Wikipedia summary of the experiment, showing how it is typically portrayed:

Yale University psychologist Stanley Milgram… intended to measure the willingness of study participants to obey an authority figure who instructed them to perform acts conflicting with their personal conscience. Participants were led to believe that they were assisting in a fictitious experiment, in which they had to administer electric shocks to a "learner". These fake electric shocks gradually increased to levels that would have been fatal had they been real.

The experiments unexpectedly found that a very high proportion of subjects would fully obey the instructions, with every participant going up to 300 volts, and 65% going up to the full 450 volts.

That “unexpectedly” part is probably not true. I think the researchers suspected, in the wake of e.g. the Holocaust, that people were generally willing to obey awful instructions in ways that they failed to account for. Their experiment was designed to answer not whether but how much.

But it turns out the “conflicting with their personal conscience” part may also have been unwarranted. The results of the experiment have usually been interpreted as a kind of cynicism or caution about human nature, and about people’s tendencies to let their consciences be silenced by the trappings of authority. But such takes may have been too optimistic.

Milgram interviewed his subjects after the experiment and found that those who stopped giving shocks felt that they were responsible for what they were doing, while those who continued giving shocks felt that the experimenter (the one giving the instructions to the subject) was responsible. Milgram theorized that his subjects, in the presence of an authority figure, stepped into a corresponding role: the “agentic state.” Once you are in that state, you stop considering yourself responsible for what you are doing and for the effects of what you are doing, and judge your actions only on whether you are doing it according to how the authority wants it done.

Arne Johan Vetlesen, in Evil and Human Agency (2005), pointed out that there is another possible interpretation: Milgram’s subjects may have had genuine sadistic impulses. In subjecting their victims to pain, they were not being somehow coerced by their situation to do things they would ordinarily not want to do, but that they were being allowed by their situation to do things they were ordinarily inhibited from doing.

He quoted Ernest Becker, who took a second look at Freud’s take on mob violence:

…[M]an brings his motives in with him when he identifies with power figures. He is suggestible and submissive because he is waiting for the magical helper. He gives in to the magic transformation of the group because he wants relief of conflict and guilt. He follows the leader’s initiatory act because he needs priority magic so that he can delight in holy aggression. He moves in to kill the sacrificial scapegoat with the wave of the crowd, not because he is carried along by the wave, but because he likes the psychological barter of another life for his own: “You die, not me.” The motives and the needs are in men and not in situations or surroundings.

Which reminded me of what H.L. Mencken (who ought to be given the respect de Tocqueville gets) wrote about the supposedly hypnotic influence of the mob:

The numskull runs amuck in a crowd, not because he has been inoculated with new rascality by the mysterious crowd influence, but because his habitual rascality now has its only chance to function safely. In other words, the numskull is vicious, but a poltroon. He refrains from all attempts at lynching a cappella, not because it takes suggestion to make him desire to lynch, but because it takes the protection of a crowd to make him brave enough to try it.

⋮

In other words, the particular swinishness of a crowd is permanently resident in the majority of its members — in all those members, that is, who are naturally ignorant and vicious — perhaps 95 per cent. All studies of mob psychology are defective in that they underestimate this viciousness. They are poisoned by the prevailing delusion that the lower orders of men are angels. This is nonsense. The lower orders of men are incurable rascals, either individually or collectively. Decency, self-restraint, the sense of justice, courage — these virtues belong only to a small minority of men. This minority never runs amuck. Its most distinguishing character, in truth, is its resistance to all running amuck. The third-rate man, though he may wear the false whiskers of a first-rate man, may always be detected by his inability to keep his head in the face of an appeal to his emotions. A whoop strips off his disguise.

Hannah Arendt, whose examination of the Adolf Eichmann trial was going on at around the same time as the early Milgram experiments, warned that the excuse of “obedience” (as used by the compliant Milgram subjects to explain their actions after-the-fact, and secondarily by Milgram himself in his theory) was not an explanation but a “fallacy”:

Only a child obeys. An adult actually supports the laws or the authority that claims obedience.

Now David Kaposi and David Sumeghy have gone back through the audio tapes and other documentation preserved from the original Milgram experiments. They found that the “obedient” subjects were not in fact very compliant at all. Indeed none of them actually followed the experimental procedures they had been instructed to comply with.

Only a few of the subjects complied with the experimental procedures they were given in full, and all of them were among those who eventually refused to continue with the experiment.

(1) no entirely “fully obedient” participant fully obeyed the procedures Milgram’s experimenter instructed them to do; (2) violations of the procedures occurred on average 48.4% of the time in “fully obedient” sessions; and (3) violations occurred significantly more frequently in “fully obedient” than in the obedient phase of “disobedient” sessions.

Tellingly, these procedural violations were not efforts to avoid giving shocks, but actually increased the likelihood that an opportunity to give another shock would arise:

The most frequent violation in obedient sessions involved reading the memory test questions over the simulated screams of the learner. Doing this effectively guaranteed that the learner would fail the test and receive another shock. By talking over the protests, the obedient subjects abandoned the [ostensible] goal of testing memory and simply facilitated continuous shocks.

The implication is that when Milgram interviewed the “obedient” subjects after the experiment was over, these subjects represented themselves as having merely obeyed because this was an excuse for their behavior that had been dangled before them temptingly during the experiment, and they anticipated that this excuse would be accepted. Milgram, by being willing to accept this excuse at face-value, in effect validated it and cooperated with the subjects in whitewashing their surrender to sadistic temptation.

As I mentioned last month, I file paper tax returns with the IRS for reasons.

Way back in the day, when everyone filed paper returns, you could go down to the library or post office and grab the forms you needed from stacks set out there for the purpose. As the IRS encouraged people to transition to electronic filing, these sources of paper forms evaporated, and you instead were expected to order the forms you needed from the IRS website, whereupon the agency would deliver them to you by mail.

At first, I might order these forms early in the year and see them arrive in early February, around the same time that W2s and 1099s and the like start showing up in the mail. But each year, the date that the forms have arrived has gotten later and later. This year I ended up filing for a filing extension–the first time I have had to do so–as the forms I needed had not yet arrived (the last one just turned up yesterday, four days before the filing deadline). The forms have been showing up in dribs and drabs for weeks now.

I mention this mostly just as another data point about the reduced capabilities of the hobbled agency.