Is ‘Benefits Hacking’ Genius? Or Immoral?

Most readers of The Best Interest do not come here to learn about Ice-T. But here we are.

Perhaps you know him best as “Fin” – a mean-mugging detective on Law and Order: SVU.

Or, maybe you remember his West Coast hip-hop days from the 80s and 90s.

The fair question to ask right now is, “Jesse…nothing against Ice-T, but where’s the transition to personal finance? Is Ice-T a new client or something?”

We’re getting there.

I just learned that Ice-T is credited with creating the phrase “don’t hate the player, hate the game,” which he coined in his 1999 song “Don’t Hate the Playa.”

If you’re unfamiliar with the phrase, my approximate translation is: “Focus on your anger on the broken system, not on the individuals who benefit from that system.”

When it comes to “the playa”—that is, all of us taxpayers—and “the game” of rules within the US tax code, I think there’s an interesting conversation to be had. Some call it smart financial planning. Others call it an ethical gray area. Either way, it’s happening—so let’s talk about it.

Many government benefits are based on income, not net worth—so what happens when a wealthy person makes their income disappear? What happens when a millionaire is on food stamps – yes, you read that right. Is it savvy financial planning or an ethical gray area? Is this “benefits hacking” a way of unfairly gaming the system or justly playing by the rules?

Income vs. Net Worth

What’s the big distinction here? Why all the fuss?

I started thinking about this question while learning about the financial independence movement. In the “FIRE” community, one of the more challenging questions most people face is:

If I retire early – say, age 45, or 50, or 55 – what am I going to do about my healthcare? Currently I’m on an employer-sponsored plan. But if I retire – no employer – then there’s no plan. And I don’t get Medicare coverage until age 65.

A standard answer is to go on the Affordable Care Act (ACA) healthcare, a.k.a. Obamacare. Enacted in 2010, the ACA is multifaceted in providing better health insurance options to poorer Americans. The ACA’s primary “means test” compares one’s income against the Federal poverty level (FPL). It does not look at one’s net worth.

Well, well, well. One intriguing aspect of FIRE and retiring early is that your income goes way down—maybe even to zero! Thus, many early retirees fully qualify for ACA subsidies, which provide them with cheap—or even free—healthcare coverage.

This begs an interesting philosophical question. Should you qualify for government-assisted healthcare if you have enough net worth to retire at age 40?

Or, is this simply a case of Ice-T’s “don’t hate the playa, hate the game?”

What Other Benefits Can Be “Hacked”?

Before diving into “Tax Philosophy 101 with a Former Engineer,” we should pause and define the other common government benefits in this conversation.

Healthcare & Insurance:

• ACA (Obamacare) Premium Subsidies – Individuals who earn up to 400% of the federal poverty level (FPL) qualify for subsidies that lower health insurance costs. Some even qualify for $0 premium plans if their income is low enough.
• Medicaid – Available to individuals with income near or below the 138% FPL threshold (varies by state). Net worth can be considered in eligibility, but for the majority of Americans, only income (specifically, modified adjusted gross income, or MAGI) is considered.
• Medicare Savings Programs & Extra Help – Helps lower Medicare costs (premiums, deductibles) for lower-income retirees, even if they have significant savings.

Tax Benefits & Credits:

• Earned Income Tax Credit (EITC) – Provides refundable tax credits for low-income earners, even if they have substantial assets.
• Child Tax Credit (CTC) & Additional Child Tax Credit (ACTC) – Phase-outs based on income, allowing some high-net-worth, low-income families to receive benefits.
• Saver’s Credit – A tax credit for low- to moderate-income earners who contribute to retirement accounts.

Food & Basic Needs Assistance:

• Supplemental Nutrition Assistance Program (SNAP, aka Food Stamps) – Based on income, though some states have asset tests and work requirements.
• Low-Income Home Energy Assistance Program (LIHEAP) – Helps with utility bills for low-income households, without strict net worth limits.

Housing Assistance:

• Section 8 Housing Choice Voucher Program – Based on income, though some local agencies have asset tests.
• Property Tax Circuit Breakers & Senior Property Tax Exemptions – Tax relief for low-income homeowners, sometimes without asset tests.

Education & Student Loan Assistance:

• Income-Driven Repayment (IDR) Plans – Monthly federal student loan payments can be as low as $0 if taxable income is low.
• Need-Based Financial Aid (FAFSA, Pell Grants, Subsidized Loans) – Many college aid programs consider parental income but do not account for certain assets like home equity and retirement accounts.

Many government benefits are a function of income, not net worth. And that usually makes sense. Low income and low net worth are usually correlated. The system usually works as designed.

Now – what are some arguments for and against people who are playing the game?

Guys – This is Just Smart

“Helloooooo!?!?! Why would I NOT utilize all these perfectly legal strategies to my family’s benefit?”

I get it—100 %. So, let’s list some reasons why today’s “controversial” topic is simply smart financial planning.

1. The system was designed this way. If the rules allow for it, people simply make rational financial decisions. The law doesn’t require people to take on unnecessary taxable income or to skip on readily available benefits just because they have some assets in the bank. It’s about compliance. I am complying with the rules. This is the game! Don’t hate the player.
2. I paid taxes. Possibly in the millions of dollars. Why can’t I then receive benefits?
3. The U.S. tax code incentivizes tax deferral and low taxable income. People who take advantage of these rules (e.g., Roth conversions, tax-loss harvesting (?!)) are simply following good planning practices. And if there’s a pot of food stamps at the end of that rainbow, so be it.
4. Nobody is “taking from the poor.” That’s not what’s happening here. Many programs (like ACA subsidies or IDR plans) are designed to help anyone under a certain income, not just the destitute. Wealthy-but-low-income individuals using these benefits does not take resources away from truly needy people.
5. These “loopholes” actually promote good financial habits. For example, many FIRE adherents worked hard and saved aggressively to reach financial independence. They aren’t “gaming the system” as much as they are reaping the benefits of their discipline.
6. What if we all saved more and needed less? If more people structured their finances to minimize taxable income, they’d rely less on traditional employment and more on passive income. In the long run, this self-reliance (through living a simpler life) would reduce pressure on government systems.
7. What about businesses, though? The list of corporate tax strategies is too long to detail here. Corporations know it’s a game and they are PLAYING IT! So if you walk away today with a bad taste in your mouth for the individuals and families, that’s your prerogative. But you’ll want some Listerine before digging into the corporate ledger.

No – It’s Cynical

At the same time, I understand why any taxpayer would look at this situation and feel aggrieved.

You’ve got $3 million at age 45 and, as of your recent “retirement,” no income.

We have two middle class jobs, three kids, and one helluva grocery bill.

So…why are our tax dollars paying for your food stamps?

Here are some reasons why this topic is ethically questionable.

1. There’s legality, and then there’s morality. And this “benefits hacking” violates the spirit of the law(s). Many of these programs were designed to help not just low-income individuals, but the needy. You can’t argue that FIRE retirees, for example, aren’t low-income. They are. But are they needy? No way. Using legal loopholes to qualify while having significant assets goes against the laws’ intended purpose.
2. Like it or not, we live in a progressive tax system. The more you earn, the more taxes you pay. It does not give you the right to then receive more in future benefits. Government benefits are designed to provide a safety net, not as a proportional reward for tax contributions. A system that grants more benefits to higher earners would undermine the purpose of social programs and exacerbate inequality, as those who need support the most might receive less.
3. Who foots the bill? Taxpayers. When individuals access subsidies, those costs are passed on to taxpayers or the government budget, potentially reducing resources for those in actual financial hardship. As with all tax philosophy, we should ask whether these taxpayer dollars are being used as wisely as they could/should be.
4. The law – justice – is about fairness. I know, I know…who’s going to define what “fair” means, Jesse?! But when a teacher earning $50K receives fewer benefits than a retiree with $2 million in investments (but only $20K in taxable income)…I understand the sense of unfairness.
5. Just as nobody wants government waste or corruption, this “benefit hacking” is an unnecessary strain on the system. If too many people minimize their reported income to qualify for benefits, it may lead to cuts, stricter requirements, or other means tests, which can hurt those who genuinely need the benefits. If these programs get cut, wealthy people can pivot. The truly needy cannot.
6. If too many people exploit these strategies, the system could topple. Or it could trigger unfavorable policy changes. Or it could further decay society’s trust in government systems. In other words – there are long-term costs to short-term money grabs.

This debate boils down to intent vs. outcome. Is the individual simply using tax laws to their advantage? Or are they unfairly taking resources meant for the truly needy? Some might say, “Don’t hate the player, hate the game.” Others argue that ethical considerations should override legal loopholes.

It’s a touchy conversation but an intriguing one. I know where I land on the spectrum of opinions, but I understand the gray area and nuances and don’t begrudge anyone for thinking differently than me.

Do you hate the player, the game, or neither?

What are your thoughts?

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-Jesse

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