The post that asks whether it’s financially safer to save as though you are single.
OK, so that title is probably a bit clickbait-y.
Of course you can be financially independent in a couple. If you’ve got millions of pounds/dollars etc. between you, such that you could split up and each of you would still have sufficient assets to never have to work again, then obviously your relationship status makes no difference.
The question is aimed at couples whose definition of financial independence means them collectively being FI, but if they were to split up then one or both of them wouldn’t be (due to increased expenses, splitting assets etc.).
This is not a snarky dig at people in couples
Given what I’ve said before about my eternal singledom and the financial benefits of being single, one might think that this is just another opportunity for me to make myself feel better about being single/try to feel superior. I promise you it’s not.
I’m genuinely seeking the views of people pursuing FI as a couple as to how they see their situation and whether they ever consider the “what if?” of breaking up.
Does being financially “independent” mean being dependent on yourself alone?
One argument I’d throw out there is that if you need the contributions of someone else to be financially independent, you are not truly independent. You are dependent on another person.
But I suppose, if we’re taking the idea of “independence” to an extreme, almost no-one is completely independent.
Even if you have sufficient assets to be FI in your own right, the performance of those assets depends (amongst other things) on stable governments, healthy economies, consumer expenditure (yes, in the FIRE community we love to rag on consumerism, but our portfolio returns depend on it to some extent). All of those things are governed by the behaviour of other human beings.
I guess those things are based on the actions of people across the nation/world and so the risk is spread. If your financial independence is vested in one person then it’s placing a lot of faith that your relationship with that person won’t change.
The spectre of divorce/break up
We all know that divorce rates are crazily high. I believe it is now over 40%. I am curious to hear from those in couples whether this possibility features in their calculations. I suppose the options available are:
Be so confident that it won’t happen that it doesn’t feature in your thoughts.
Accept that it might happen but just decide to deal with it if you ever get there.
Accept that it might happen and make sure that your FI goals reflect this.
What school of thought are you in?
What’s mine is yours
I accept that most couples take a “what’s mine is yours” attitude to their assets. Whilst I’m not sure this would suit me, this post is not a criticism of that approach.
My question is, would your collective assets, if split down the middle on the occasion of a break-up, allow each of you to remain financially independent?
The biggest asset where this is likely to be an issue is, of course, property. Could you afford to buy/rent your own place or buy out the other person’s share of the property?
On FIRE blogs we often hear from the financially stronger member of the partnership. They usually take the “what’s mine is yours” approach above and I have no doubt of their sincerity. However, it would be interesting to hear from the financially weaker partner as to whether they are ever nervous about their situation.
Once a couple has reached FI then this is perhaps less of an issue. If your collective assets are double what one person would need to be FI then there is no issue. But on the road to FI, a break up could mean a serious delay to your FI goals if your savings rate suddenly plummets.
Do you ever consider this? Do you have separate projections for where you’d be if you were going it alone?
Not an issue specific to early retirees
This is an issue that applies to couples whatever age they retire. I would take a guess that quite a lot of couples, once they retire, partly stay together because they have no other choice financially.
In fact, for the majority of baby boomer couples I’d wager the majority of their wealth is in a jointly-owned home. This makes financial independence from one’s spouse highly unlikely. In this regard, adherents to the FIRE community are more likely to be prepared for a break up as we are more likely to have liquid assets.
I appreciate that with all the questions in this post it looks more like a survey than any kind of analysis. In many ways it is. I’m genuinely curious to get people’s views and experiences. It’s a bit rude to ask people directly so I’m asking via this blog.
Let me know your thoughts in the comments below.