Sure anyone can FIRE and live in a very inexpensive way if they find themselves divorced with kids. Heck a van down by the river, the kiddos in a tent and some government cheese will work ;-).
But my point wasn't that it couldn't be done, more that it may mean it is too lean a FIRE once basic non-discretionary expenses are increased, or even doubled for each person, and income and assets are halved to make it practical for many people. If you have a house in HB you bought 20 years ago for 1/4 it's current value, and very low prop 13 taxes, paid it off pre-FIRE and based your FIRE # on those expenses, plus all the other expenses that are shared in marriage but don't go away if divorced, then even selling and downsizing and using up your share of the joint stash to each set up separate downsized households may mean you might not have enough left over to cover even very lean FIRE expenses.
Not saying it can't be done (I did it following a divorce) just that there are lifestyle costs involved as well as actual financial costs that have nothing to do with your former spouse's over spending.
I know you did it! That’s why I was like: Guys, we’re Mustachians, yes it’ll be leaner FI than we originally planned but it can still be FI!
However, you bring up a really interesting corner case that only applies to homeowners in CA who are getting divorced over the age of 55 and who have owned their home for a long time. But for those people it is a really REALLY important thing to know. Apparently when selling the house in the divorce, only one of the parties can apply the Prop 13 property tax basis to another house (basically whoever buys a new house first):
https://www.cdsoc.com/effect-california-propositions-60-90-divorce/
So yeah, unless such parties were willing to sell and move into either side of a duplex together, one of them would likely be priced out of the entire state from the associated property tax increase. And the craziest thing is that most divorce settlements never address tax implications at all.
I formally concede. This is such an impressively disastrous corner case that if it applied to me, I have to say a divorce would most certainly jeopardize my retirement.
YAY I win the internet ;-).
But seriously I don't consider it a corner case as I divorced in my late 30s not 55 so there was no taking my/our prop tax rate with us if we sold and had separate households.
It was more like we planned to FIRE at 38 and live on a combined passive income of about $40k per year with a low cost mortgageless house until we where petless (3 cats and 3 large dogs) and could downsize to our little paid off sail boat. I think that is the sort of FIRE plan a lot of people on MMM have. Maybe with kids and pets.
So where I found myself at was 1/2 the planned passive annual income ($20k instead of $40k), keeping the house because of pets (and I also back to work at my old job for a bit to pay of DH and house) and buying the DH out and paying the remaining mortgage and all other housing costs myself on a reduced income. While I was technically FIRE is was very lean and required roommate and some extreme budgeting. I eventually sold the house and moved to a lower COL area and that enabled a fatter FIRE so all good. But not everyone can do that. And I think those with kids or who are somewhat dependent on a larger income than half their FIRE income need to consider that.
I really appreciate hearing this perspective, so thanks for sharing all these details.
Was your house actually taxed at 1/4 market rate in your late 30s?! If so, I don’t think you're appreciating just how rare that was. You must have purchased that house very young, renovated right away if at all, not needed to relocate during your entire career, and had a lot of good luck with market appreciation. Or maybe you hit the jackpot and bought your house in 2011 at the very bottom of the once in a generation real estate fire sale?
For me, I’m about the age you were when you went through your divorce, but my Prop 13 tax basis is 93% of market rate. That’s because we relocated for a job and so sold our old house and purchased a new house, resetting the tax basis. But even if we had still been in our first house (a Bay Area foreclosure we stretched to afford at age 26), and even if we wanted to continue to live in our first house forever (we didn’t, the only neighborhood we could initially afford was pretty sketchy), and even if we also resisted the urge to renovate (we dreamed about the day when we’d have more than one bathroom), at this point the Prop 13 tax basis would still be above 50%.
But I would be in a similar situation to you if I was to divorce sometime after 15 more years of real estate appreciation. So you’re right, it’s not a corner case for me, but it is for most of the people on this forum... since it requires a couple of things:
1. Live in California (it’s the only state that does this funky thing with artificially holding property taxes lower than they would be at market rate): 12% of the U.S.
2. Own a home in the areas of California that the property values have increased significantly more than the capped 2% per year, and have owned that home long enough to have a significant difference between current market value and original purchase price, and have not done a renovation that caused a reassessment of your home’s value. 22% of CA homeowners pay a tax basis that’s less than 1/2 market rate, but only 9% have a tax basis less than 1/4 market rate: 9% of 12% of the U.S. = 1%
So for the 1% of this forum that this situation could apply, to stay retired they’d either need to drop down to ERE-level FIRE like you did or consider moving to a LCOL area, like you did later ;)
