Joe Biden: Good or Bad for the FIRE Movement?

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As the US enters an election year, the news media has become filled with talking heads and opinion pieces either excoriating the President Biden as worse than Hitler, or the best president to have ever done the job. Both extremes are exaggerated to get clicks, of course, but whether Joe Biden’s been a good or bad president really depends on who you ask.

Every president passes policies that benefit one group of people at the expense of others. That’s the nature of the game. Depending on which group you happen to be in, you’ve seen those policies benefit, or hurt, your bottom line, and that will determine whether you like him or hate him.

Today, I thought it would be interesting to look back at Joe Biden’s first term from the prospective of the FIRE community.

Has Joe Biden’s policies made it easier or harder to retire?

Let’s find out!

Student Loans

One of the biggest issues that have screwed over Millennials trying to achieve FIRE in the US is student debt. I regularly get case study requests from readers who have more than $100k in student loans, which is just nuts. No other developed country has student loan balances this large.

The reason for this is twofold. One, higher education is just way too expensive, which obviously means bigger loans. And second, if you don’t earn enough money to pay these loans off, the problem just gets worse and worse. There are programs for federal loans like the PAYE, IBR, and IDR that cap your minimum payments to a percentage of your discretionary income, but that just keeps your loans from going into default. The interest from that loan still compounds, so the balance continues to grow.

The people that are the most screwed by this system are people who enroll in expensive degrees, like law, medicine, or a PhD program, go through most of the program, but they don’t finish it. Either they drop out, fail out, or some family/medical emergency forces them to stop. These people are stuck with all of the debt, but no degree to show for it, and they get hammered. They’re stuck working low-wage jobs, they can’t cover the interest on their debt, and the balance keeps going up. For these people, fleeing the country and never coming back is an actual possibility that they contemplate. Usually you have to murder someone before you consider fleeing the country, but nope. Student debt is making them run for the border. Bizarre.

Thankfully, this situation should not happen anymore. In 2023, the Biden administration announced the creation of the Saving on a Valuable Education, or SAVE program. Wow, these guys really go out of their way to name things so they have a catchy acronym, don’t they.

Anyway, it’s a new income-based repayment plan that theoretically operates alongside existing ones like PAYE and REPAYE, but in practice it’s just so much better that the others are irrelevant now.

When SAVE was first rolled out, most of the media attention was centered around how it lowered monthly payments by changing the way they calculated your discretionary income. However, by far the more important change was this:

If you make your full monthly payment, but it is not enough to cover the accrued monthly interest, the government covers the rest of the interest that accrued that month. This means that the SAVE Plan prevents your balance from growing due to unpaid interest.

StudentAid.gov

This eliminates that “debt spiral” problem I described above, because now your loan’s interest won’t compound. Under this plan, your loan’s balance can only go down, but never up.

Everyone who has a student loan should enroll in this plan immediately even if you could easily afford the loan payments, because it protects you from getting into this “debt spiral” situation if you were to ever lose your job. Even if your loan has already defaulted, you can apply for it via the Fresh Start Initiative, which is free and gets your loan back into good standing.

Go to the Department of Education’s website on this program for more information, and instructions on how to apply.

Health Care

Another huge headache that American early retirees have to contend with is health care. Because health insurance is still primarily provided by employers there, quitting your job means that you have to buy health insurance on your own. This use to be a retirement-killing proposition since you could be denied coverage for having a pre-existing condition. But in 2010, then-President Obama passed the Affordable Care Act into law, and Obamacare was born.

Obamacare changed the health care landscape and basically made early retirement possible, since it closed off the ability for health insurance companies to deny coverage, as well as providing government subsidies that tied the cost of health insurance to your income. Now, early retirees could leave their job and know that health insurance would be available to them at a reasonable price.

That being said, Obamacare wasn’t without its issues. The Obamacare subsidies were tied to your gross family income, and ended when that income was at 400% of the Federal Poverty Level (FPL). Early retirees don’t have literally $0 income, they still report income in the form of interest and dividends in their investments, money withdrawn or converted from a 401(k) plan, as well as any side hustles or passion projects, and this requirement meant that early retirees had to be very careful in managing that income. If you made even $1 over this 400% FPL number, your Obamacare subsidies went away and your health insurance costs could skyrocket by hundreds or thousands of dollars per month, depending on where you lived.

This effect was dubbed the “Obamacare subsidy cliff”, and our friend and fellow blogger Jeremy from GoCurryCracker wrote about all the stuff he has to do to avoid this on his site.

But now, this issue has been solved.

President Biden fixed this as part of the American Rescue Plan, which was a $1.9 trillion stimulus plan designed to help get America out of the pandemic. Now, health insurance premiums (of the benchmark Silver plan) are capped to 8.5% of household income. It no longer matter whether that amount was relative to the FPL, so the Obamacare subsidy cliff disappeared.

Again, this is a huge relief to the FIRE community, because now you can make as much (or little) income as you wanted in early retirement without worrying about making a math error that resulted in a big hit to your budget.

One big caveat though. This change is temporary. It was renewed in the 2022 Inflation Reduction Act, which makes it effective until 2025, but after that this protection expires, so whoever wins the next election will determine (among other things) whether the FIRE community has to worry about health insurance costs once again.

And as a commenter pointed out, there’s still the issue of states that have refused to expand Medicaid, leaving low-income earners with no coverage. But that’s not really something Biden has power over, since it’s the state that’s refusing to do the right thing. If you’re living in one of these states when you retire, move to another, better state.

Stock Markets

And finally, a little thing called the stock market.

The FIRE community draws their retirement income from index funds that track the overall stock market, so the performance of the economy, and by extension the stock market, affects us all.

So how has the economy done under Joe Biden?

Pretty damned well, actually.

Inflation has been the demonic ghost that has haunted the US economy throughout Biden’s term, and killing inflation is super tricky. The government basically has one weapon, and that’s interest rates. If you raise interest rates, inflation falls, but raise it too much, and a recession happens.

So that’s why Biden and central bank chairman Jerome Powell have had to engage in an incredibly delicate balancing act, essentially pinning Biden’s economic legacy on whether they can achieve a mythical “soft landing,” where they raise interest rates just enough to kill off inflation without triggering a recession.

I didn’t think they could actually do it, because it’s literally never been done successfully before. But sitting here in 2024, those crazy sons of bitches actually seem to have pulled it off!

Inflation has fallen from a record nosebleed level of 9.1% in June 2022 to a much more manageable level of 3.4% as of December 2023. While this has happened, jobs have continued to be added, with the latest Bureau of Labour statistics showing a stunning 353,000 jobs being added last month, and a record-low unemployment rate of 3.7%, which is considered full employment by economists.

“The fact that the unemployment rate has been below 4% for 24 months straight for the first time since 1967 is truly remarkable,” Joe Brusuelas, chief economist and principal at RSM US, told CNN. “And that’s the word I keep saying as I look through this report: ‘This is remarkable.’ ‘Remarkable,’ is the takeaway here.”

The US economy added 353,000 jobs in January, starting off 2024 with a bang, CNN.com

The result has been a steadily increasing level of consumer confidence, which has resulted in increased consumer spending, and has powered the S&P 500 to a gain of a whopping 24% in 2023, as well as an additional 5% gain so far this year.

This is how the US has fared against the rest of the G7 countries in terms of real GDP growth.

No other country in the G7 has recovered from the pandemic as strong or as fast as America, and Joe Biden deserves a lot of credit for that.

Conclusion

So regardless of your personal take on this president, from the perspective of the FIRE community, Joe Biden has really helped us out a lot. Not only as he and his team managed to fight inflation without triggering a recession (a feat which, again, has never been pulled off before), his policies have removed two major roadblocks facing FIRE seekers: Large student loan balances that grow if you can’t make the minimum payments, and the Obamacare subsidy cliff.

Put it all together and it’s never been easier to early retire in the US. Thanks Joe!

What do you think? Do you think Biden’s policies have made it easier or harder to retire? Let’s hear it in the comments below!


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34 thoughts on “Joe Biden: Good or Bad for the FIRE Movement?”

  1. Again, this is a huge relief to the FIRE community, because now you can make as much (or little) income as you wanted in early retirement without worrying …

    =======================================

    Hmm. That’s NOT true.

    If you have too LITTLE income, you don’t qualify for help with paying for health care.

    See here:

    https://www.healthcare.gov/medicaid-chip/medicaid-expansion-and-you/

    “If your state hasn’t expanded Medicaid, your income is below the federal poverty level, and you don’t qualify for Medicaid under your state’s current rules, you won’t qualify for either health insurance savings program: Medicaid coverage OR savings on a private health plan bought through the Marketplace.”

    This is even scarier than the subsidy cliff you mentioned.

    Perhaps you’re writing from the Canadian perspective, that’s why you’re not aware of this. But you should amend your post above.

    1. I think if you’re pursuing FIRE and are calculating possible hacks to manage health insurance, you’re aware if your state has expanded Medicaid or not. I’d be curious how many FIRE folks are living in the deep Southern states that have mostly abstained from Medicaid expansion…

    2. True, but the Medicaid coverage hole problem isn’t really something that the federal government has control over. It’s literally the state refusing to do the right thing. As I wrote in my book, if you live in a state that’s refused to expand Medicaid, don’t retire there.

      But I get your point that the statement in my article is misleading. Correcting it now. Thanks for point this out!

      1. Regardless of which US state you live in and whether that state has expanded Medicaid, here are more points to consider:

        1. It’s not easy to qualify for Medicaid: in some cases, you’d only qualify if you’re pregnant or have young children;

        2. Medicaid qualification may be contingent on the value of your total assets, not just annual income!

        3. Many healthcare providers don’t accept Medicaid!

        Those are some of the reasons you don’t want to have TOO LOW of an income so that you qualify to stay on ACA instead — even if the state has expanded Medicaid.

  2. Honestly, I don’t think a president makes a huge difference on what the economy wants to do or doesn’t want to do. Everything is a cycle and what goes up goes down. I have heard that the year running up to a presidential election is typically good for the stock market and I also believe that Trump would probably have a more favorable impact on the stock market if elected. However, that remains to be seen. One thing that makes me nervous with Biden is our open border and how many people that are coming through are going to impact the economy. Unless people can find jobs and be productive citizens, they become a drain on our society through no fault of their own.

    1. Regarding the border issue, Republicans walked back on an agreement that could have resolved it for fear of making Biden look good:

      “Congressional Republicans had been largely pleased with the resulting deal. The reliably conservative Border Patrol union endorsed it, and Biden and Republican negotiators repeatedly signaled their joint optimism that a deal would be reached. But it all unraveled after Trump, who remains a GOP kingmaker, signaled his opposition.”

      https://www.cnn.com/2024/02/06/politics/biden-border-bill/index.html

    2. Same for me. It’s the 21st Century, not the 19th. Massive illegal immigration from poor countries inevitably creates a strain on social services and pulls down wages for lower paying jobs, which contributes to income/wealth inequality. Plus, you’ll inevitably get a small percentage of bad actors who can really create a lot of crime/chaos. People who say the border issues aren’t any worse than under Trump just mean they don’t see it negatively impacting them personally. But it will.

  3. I personally worry about the huge deficits the United States is running. As you mentioned, education costs are too high. The government subsidizing student loan interest doesn’t fix that problem. Obamacare, once again, is about subsidies, and, once again, it doesn’t do anything to actually reduce the total cost of health care (or even slow down the rate of spending increases). Once again, those subsidies are just going on the government’s tab. Other G7 countries may not be growing as fast as the U.S. I bet they’re also not running up as much debt as a % of GDP as the U.S. is, either.

    1. Yes, this is the correct answer. The only thing that can derail good financial planning is inflation. And the Demoratic deficits have caused massive inflation. The masses deserve to suffer accordingly…

  4. With an economy as fragile as ours was after the disastrous presidency preceeding Biden, a great President can make all the difference in the world. Bringing in an astonishingly adept and intelligent cabinet (who filled their staffs with the same). Staying out of the Fed’s hair and not making threats was helpful, I am sure. Even corporations headed by conservatives respond better to a steady hand at the tiller instead of absolute chaos. Statistically the border is no worse under Biden than Trump despite the constant yammering of the pernicious Freedom Caucus. A lion’s share of the funds from the infrastructure bill has already gone to projects in red states who need them more desperately than blue. Red states have also mainly rejected Medicaid expansion which contributes to problems for FIRE retirees as mentioned in a reply above.

    The vote in November should be of HUGE concern to the FIRE community, even non-Americans whose economies will not prosper if ours tanks because of the return of revenge and grievance politics to the White House.

    1. Exactly what kind of drugs are you on? 10 million illegals sine Dementia Joe took office…. No way illegal immigration was anywhere near as bad under Trumps administration.

  5. Not everyone should enroll in SAVE immediately.
    PAYE offers faster debt forgiveness since grad loans are forgiven in 20 not 25 years.
    Also some people are still at $0 calculated repayment due to when their loans last were certified. If they switch to SAVE their payment will be recalculated immediately. Those people should still probably switch to SAVE, but wait to do so until after their next loan recertification (which might not be until 2025).
    As always crunch the numbers.

  6. My portfolio and my household spending looked a lot better under Trump.
    I’m Canadian and have no skin in this game in the USA but my experience going there over the last 4 years paints a very different picture than this article’s author.
    High crime, high prices and homelessness everywhere?
    Canada is no better and the debt just keeps piling up?
    The yield curve is still inverted and I don’t believe for a second that Biden and the Fed can walk up a flight of stairs never mind land this “economy”plane?
    Personally it feels like a recession is right around the corner and the media is ignoring the signs?
    As for student debt forgiveness, if you make a promise you should honour it. Imagine the kids who don’t go to college and go straight to the workforce being forced to pay the bills of the student doctors and lawyers ?
    I don’t know, I usually agree with firecracker on most things but I definitely don’t see how we are better off today than we were 4 years ago?

  7. OMG he’s a genocidal maniac, I can’t believe you just wrote this post! He should rot in hell! He is responsible for thousnds of deaths!

  8. Terrible. Biden is the worst !!! We need to stop paying for war machine abroad and worry about our own issues at home, that aren’t just a few.
    We need peace around the world and US provoking every single ‘non-aligned’ country is a recipe for another WW
    Besides, stocks went up much more under Trump, he’s a businessman while Biden is just another one in the DC swamp

    1. His policy of endless war is real bad for inflation. Oil is up. Natural gas is up. Shipping costs are up. Everything he’s done is hurting early retirees at the expense of weapons makers and small business.

    2. I agree with this as a Canadian – and I’m not happy with my government either on this issue. We should be cutting off Israel, it’s a war crime. But Trump started the ball rolling with moving the US Embassy to Jerasulem and he loves any strongman, including Netanyahu. I don’t think he will handle this any better. The war machine keeps the US economy growing and makes the 1% happy

  9. My student loans of $119,000 which has been spiraling out of control for over 20 years were finally forgiven thanks to Biden making them take a look at all the older loans that had been messed up. So huge!

    1. No, it wasn’t Biden who paid it up…it was us, hard working americans…Thank us who don’t have debt and pay our taxes for your luck.
      Who would take such huge debt? and dont pay in the end…man..US is no better than communist China

      1. I’m curious what you think happens in bankruptcy, and why someone should be unable to avail themselves of the bankruptcy courts when in comes to this specific type of debt. Every other type of debt is extinguishable in bankruptcy except for student loans. Would you prefer to open up the bankruptcy courts to people who have crushing student debt instead? These aren’t rich people who have positive net worths tying to game the system so they can cheat you out of your tax dollars. The majority of people that would have been eligible for student loan forgiveness were low income families, women, and POCs. I am sure if they could declare bankruptcy, and lose “everything” in exchange for debt extinguishment, they would do it in a heartbeat.

      1. I did pay. I paid every month for over 20 years except when I was on forbearance for being laid off in 2008 and when I had major health issues for a year. I was encouraged to take for forbearance instead of income based payments, which would have also been $0 and counted towards my years of forgiveness, well as refinancing in 2015, so it took a human looking at it to figure out I had passed the 20 years and should have been forgiven. I don’t have the exact amount but it was over $90,000. The rest was interest.

  10. “One of the biggest issues that have screwed over Millennials trying to achieve FIRE in the US is student debt.”

    “The reason for this is twofold. One, higher education is just way too expensive, which obviously means bigger loans. And second, if you don’t earn enough money to pay these loans off, the problem just gets worse and worse.”

    “Screwed over”? Hardly. These people made their decision and decided to take a loan. Many did so without regard to whether their chosen career would pay for their loan. They screwed themselves, no one else did it to them. IRT it being too expensive, blame government involvement. Without government involvement tuition would be much less expensive.

    1. Sadly, the student loan crisis is basically a lesson in predatory lending. So, to the extent you blame victims of predatory lending practices for being preyed upon, then your comment is accurate. Otherwise, think about whether an 18 year old is sophisticated enough to be given $30,000 to attend university without an existing job offer (let alone an actual job and stream of income) on the table. That would be outrageously predatory in any other credit/lending context, but for some reason, it’s fine in the context of student loans.

  11. Wow! I don’t know where to begin on the ignorance of what I just read. I’m shocked, that you would write about how wonderful Biden is when you live in Canada. Have you been to a grocery store in the US lately? How about insurance in the US? The younger generation will pay dearly for this presidency.

  12. I’m doing much better under Biden than the previous travesty. If this holds up through the election, I will be able to retire early in less than a year. This is huge for me personally. I have a very rare 9/11 illness and my time is more valuable to me than almost anything. My personal inflation rate has not been bad. Thanks for the blog, I’ve gotten useful info over the past few years as I planned my FIRE journey! I’m so excited, almost there.

  13. Haha, not even close on the market comparison. Backtest of VOO for Trumps term gives CAGR (compound annual growth rate) of 15.13% (inflation adjusted of 13.01%). How did Bidens term do so far? CAGR 10.96% (inflation adjusted only 5.04%). Sorry, Trump WAS definitely better for the economy and investments in US stocks!

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