Author Topic: Thoughts on FIRE-ING before your spouse...  (Read 4429 times)

TomSelleckJR

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Thoughts on FIRE-ING before your spouse...
« on: August 13, 2018, 05:01:02 PM »

I'm looking for the insight and wisdom of the MMM forum.

I'm several years older than my wife (4 years).  We have also kept our finances somewhat separate during our marriage as we've maintained "hers", "Mine", and "ours" accounts since the beginning.  I also make a significant amount more than she does, but have a significantly higher stress job than she does.   Her job has a really great pension plan, good work environment, 403B and 457, good insurance, a good amount of PTO and vacation too.  She has to (and wants to) stick it out for about 17-18 more years in order to be eligible for her pension, which puts her at age 55. She is quite frugal and good with money, and will have great income when she retires at age 55.

Here's the rub...   I should be able to FIRE in 6 years, which leaves a 12 year gap until she can join me.  Not exactly ideal in my opinion.  One thought was for me to work 9 more years (putting me at 50 years old when I retire).

We've had this discussion, and she seems to be supportive of me FIRE-ing before her.  She acknowledges that my job is a much bigger headache, and that my level of income and mustachianism has put us in a position that allows her to have an ~80% savings rate.  She knows that I don't necessarily love what I do, but have stuck with it due to the income. 

I think that I am HIGHLY likely to pick up another job after retirement, just in an area that is much more in line with my personal interests, but that's no guarantee. 

Has anyone else encountered a situation like this?  How did it go?  Did your spouse have any resentment toward you for FIRE-ing before them?  Do you have any thoughts or suggestions for ways to FIRE before your spouse without causing relationship issues?

Thanks in advance everyone.

chasesfish

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #1 on: August 13, 2018, 05:16:20 PM »
We did this.

I'm probably in a much different situation than you are given age, age difference ect, but here it goes and this is from the working spouse's perspective.

My wife and I have what I would call equally stressful jobs in terms of time commitment and headache, but she was/is a veterinarian and had some emotional headaches with her job I would never understand.  Her retirement wasn't entirely planned, but it was more of a "break"

She left her job at 33 and we moved to take a career opportunity I had.  10 months later, another, really big career opportunity comes along.  We move again.  Life is pretty disrupted, I'm the working spouse with a stressful job, she's the awesome companion that helps deal with the house we're selling, rental house, house we're buying, all while playing awesome defense with our money.  The intention was there to work, but in the span of 17 months my base salary grew to basically replace both of ours.  She ended up having a difficult medical issue she's hopefully almost finished with, so the last two years she wouldn't have been able to work if she wanted to. 

My boss of six years who I stay in touch with is also in this position, he retired early at 53 but his wife is 41 and is still driven in her career.  Hopefully I can share some observations from both my experience and what I observe with his that will help:


1) Make sure you have something to retire to.   My wife is a lot less stressed, almost to the point of not enough going on.  She was always driven toward a goal and her entire life was designed around making it to this career / profession.  No kids yet, no hobbies, no friends outside of work or friends she developed through school.  That means she's relying a lot on me, which is added stress for the remaining working spouse.   Make sure you have your goals / wishes ready and you can do a lot of them without her while also supporting her.

2) There's just some stuff you're going to need to take on 100% as the non working spouse, its not fair to the working spouse to still pickup half the chores in the house/yard.  I've loved not mowing the yard for a few seasons, it makes up for the pressure I feel to stay around her all the time when I'm not at work.

3) I'm not sure what the children situation is, you didn't specify.  That has made it much harder for us, while I see others going through it where parental involvement/volunteering can quickly replace a portion of the value someone received from work.  My old boss loves it, his wife loves his level of involvement allowing her to focus on her career.   

Just have a plan, here's what you want to do after work, here's what additional things you'll pickup, here's what you'll do for social interaction.  I think we would have been a LOT better off not taking on too much at once, her quitting her job and us moving was less than ideal, but required for the situation.

BTDretire

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #2 on: August 13, 2018, 06:27:07 PM »
I'm in a blow up argument as I write, (she just jumped in the shower) I'm 63, put in a long 15 year
at the business we own. We have it made. I want her to close the business* because I don't have any interest in working. It has always been just the two of us. I'm down to about 30 hours in the summer, 20 hrs in the winter.
  My wife works 70+ hours, comes home and works her lawn and garden.
I finally told her I will not be working at all next year and she will need to hire someone.
  I expect a few rough years.
 We have saved for 37 years, with SS and 4% we can easily have an $80,000 a year income,
probably $30,000 more than we have lived on the last 10 years.

*Maybe not, I don't know if I want her around me  the additional hours.
Troubling times.

sui generis

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #3 on: August 13, 2018, 07:16:27 PM »
Great topic and I will follow with interest.  I FIRE on Friday, so it's of quite acute interest to me!  So far, my fiance has been very supportive of the frugal lifestyle (well he was already living it his whole working life) and of me retiring early, after years of talking about my dissatisfaction with my then-job, jobs in general and my new job.  He thinks he might retire a little earlier than normal age too, after we've talked a lot. 

But I can tell he's torn.  He's so excited about some of the ideas for trips I'm talking about that he starts talking about trips he wants to do...as if he would be able to do them without retiring.  He really loves his job and feels like he's contributing to something valuable, but also doesn't want to work quite so hard.  He feels concerned that he is not keeping up with the latest in his line of research, but also sort of has that feeling of not wanting to *have* to be so competitive.  I empathize with all of this.  And I'm giving him time to see where he arrives in his thinking on his own schedule, and we have already discussed him taking some short sabbaticals so we can do more traveling together.  So that all sounds pretty good and optimistic.

But, I do have questions about how this will go.  He told me he doesn't want to not do his share of the household chores when I retire.  And I told him I appreciated that, but I also might want to do more so that when he isn't working we can enjoy that time together more.  I think this will be a point we have to work out together.  What will he feel comfortable with as an individual (and a feminist that doesn't want to feel like he's leaving the traditionally female work to the female, even if there are other reasons it makes sense) vs. what most enhances our relationship.  We also keep separate finances, so would it make sense for him to pay more on certain expenses in exchange for me doing more work?  I recoil at this a bit as I don't want to feel like he's paying me.  So this one will evolve over time.

I was also the breadwinner by far and while I didn't generally work longer hours than him, I certainly hated my job a lot more and experienced probably a bit more stress than him.  He's frugal enough that he could retire but see above about how he likes his job. He's 6 years older than me, but still a good 15-20 years away from any traditional retirement age, much less the age at which people often retire, like his dad at 74 last year.  I'm not sure if I'll get antsy and want him to retire earlier than he wants to, or enjoy the time to myself a lot and leave it be.  I hope and will try not to put extra pressure on him, but allow him to find his way as he has given me space for me to find mine.

I've been a bit concerned about being starved for social interaction and relying on him too much for it.  But then I recall that I get almost no social interaction at my current job, so retiring could not be worse, and with the various plans I have I expect to get more social interaction after retirement.

These are just some of the issues that come to mind immediately that we are facing.  I'm very curious to see how they work out and how we evolve, and I look forward to others with experience posting here.  I know there are several, at least, with one spouse working and the other FIREd, and off the top of my head, I'm thinking @G-dog ?


G-dog

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #4 on: August 13, 2018, 07:37:37 PM »
Yep, my spouse still works (amen to not necessarily wanting the around 24/7 - maybe at least not during your post-work decompression phase 😛)

We are married. No kids. I’ve been the primary breadwinner our entire marriage, since spouse started grad school (worked one year after BS, then started grad school).  We have also kept our money separate (one ant; one grasshopper).  Household bills are allocated to one or the other of us. As spouse’s earning have increased, more household expenses were transferred (especially if the ant learned that the grasshopper was buying crazy expensive shit - a sign of too much expendable income).

Spouse’s job has a societal purpose, mine didn’t really. He likes his job, and isn’t interested in retiring yet. I burned out and came to hate my highly-compensated job. At about 53-54 yo I learned of this place.  I learned some things, got my ducks in a row, and FIREd at 55 yo (55.25 yo).  I did not FIRE to so eth8mg, so I would say that this depends on the person. They all say that here, but then again - I wasn’t that young when I left work.

 Our money is still separate, I cover the bills I covered before o left work. Spouse was worried before I left - I could tell but he never said why. My high salary made his life very easy financially - most of his money is his fun money.  After I FIREd, I think he has been relieved. I am happier and less stressed. I do more things around the house. I’ve been able to really care for our senior dogs. Dinner is usually ready when he gets home. 

The dogs have been fucking ecstatic! But they still don’t pay any bills.

Feel free to ask any questions.

Noodle

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #5 on: August 13, 2018, 07:54:00 PM »
I am actually acquainted with quite a few older (ie, not with kids at home) couples where one is working and the other is not (or at least not full-time)--perhaps one has retired, or was the trailing spouse on a corporate transfer, or was the SAHP. It does seem to really help when the not-full-time partner has their own interests, whether volunteering--either leadership in one organization or smaller commitments to several--or some kind of small business or part-time job. (I will admit that most of them seem to solve the division of housework problem with cleaners and a lawn service, which may or may not be acceptable to you, and then the not-full-time partner handles most of the errands and appointments.)

TomSelleckJR

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #6 on: August 13, 2018, 09:00:48 PM »
Great info Chasefish, thanks for chiming in. To address your comment,  no, there are no kids involved. Just her and I. 

Also, I am fully on board with accepting more household responsibilities after FIRE. I'm not much for being idle. Hell, I quite look forward to it.

You're dead on about having something to retire to.  That will be a big one for me.


G-dog, it sounds like our situations are VERY similar, including how my wife and I  have handled bills between us. 



Interested to hear more feedback.  Thanks everyone!

G-dog

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #7 on: August 13, 2018, 09:04:57 PM »
Ah, but you are not married to a grasshopper! It seems you are not a grasshopper either.


TomSelleckJR

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #8 on: August 13, 2018, 09:08:47 PM »
Also, for anyone that has gone through this, have you experienced any social backlash? 

I'm curious to see if anyone has been "called out" for retiring early while their spouse still works.  I'm sure there are some interesting stories out there.  Lol.

TomSelleckJR

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #9 on: August 13, 2018, 09:38:27 PM »
Ah, but you are not married to a grasshopper! It seems you are not a grasshopper either.

That is very true.  We are definitely not grasshoppers.  👍🏻

iluvzbeach

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #10 on: August 13, 2018, 09:52:34 PM »
My DH FIREd two years ago and I’ve got barely under 23 months left on my “sentence.” It has worked quite well so far. He voluntarily does 95%+ of all housekeeping, grocery shopping and other errands. I make significantly more money than he ever did, and my job is very stressful, but his retirement balances are larger than mine and it all just works for us. I could leave my job tomorrow and we’d be fine, but have set my FIRE date on other criteria that makes us feel more comfortable.

He’s understanding of the commitment and travel my job requires and I appreciate the other support he provides for our household. No children.

It can work as long as you’re both on the same page.

Kakanui

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #11 on: August 13, 2018, 11:35:24 PM »
Ours is a bit different. WE semi-FIREd in 2000 and my wife and I job shared a part time teaching gig for 10 years (each teaching about 12 hrs per week- 3-4 mornings or afternoons) while the kids were young. Eventually I was offered a full time role as head of programme but they wouldn’t accept my 4 days offer so decided to go full time for 2-3 years to give myself time to talk them around to my preferred work/life balance. 3 years became 5 as part way though my wife decided to retrain as a midwife (3 years fulltime study) and teenagers aren’t cheap so decided it made sense to work a couple more years fulltime till she graduated.

After she did I did one more year fulltime- to pay for some renos to my holiday home and then fired again and did a part time gig 3 days per week last year for a local charity.

My wife works 4 days per week doing various shifts at the local hospital. I’m at the point I want to travel, kids finishing school, rental properties doing well, time to kick back and enjoy life.

Only downside, my wife loves her new role as a midwife and not keen to give it up to travel (she’s still learning plenty and very settled in her life/routine where we live). Me, I’ve had itchy feet for the past couple of years and needed to get out and do something different so I’m spending the year volunteering in the Pacific (though I’ve had a couple of trips back home). She and my son are due out soon for a holiday and I hope it will show her how we could combine her career with travel and volunteering. Also, her dad is in his eighties now and I know she won’t consider year long gigs at present in case something happens to him.

I know she will carry on working 4 days over week till official retirement age and she loves her job. Whereas I’ve had enough, I will do some more part time work (6-8 hours per week), manage our rentals and do more volunteering overseas (I’d prefer it was together though) and we’ll continue to make it work.

Kakanui

K-ice

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #12 on: August 14, 2018, 12:10:31 AM »
I think a few things are key to make this work.

The retired person needs to step up with more chores & still cover their share of the bills.

The working person needs to still have decent vacation time and should love their job.

It would kinda suck if the higher earner just threw up their hands & said I’m done.

I knew one couple where he was 15y older, 50 ish, got laid off and then kinda said I’m done. Her career was ramping up but wasn’t mentally or financially prepared to be the sol bread winner. It didn’t work, mostly because he was missing the FI of Fire.

G-dog

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #13 on: August 14, 2018, 05:51:57 AM »
Also, for anyone that has gone through this, have you experienced any social backlash? 

I'm curious to see if anyone has been "called out" for retiring early while their spouse still works.  I'm sure there are some interesting stories out there.  Lol.

No - for probably two reasons:
1. We now conform more to society’s gender norms
2. Older (if I retired at 30 yo and wasn’t going to be birthing babies, then it may have happened)

edgema

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #14 on: August 14, 2018, 06:56:43 AM »
If my spouse were still in full time employment (she is not) I would find it very difficult to lead the FIRE life I want to. Having to still organise my life around working weeks and vacation dates / allowances would be a massive frustration as it would take away a decent part of the freedom I am excited about. Most obviously this includes extended travel, and this may not be your thing, but plenty of other stuff as well.

I believe your situation it boils down to two basic statements;

"I can afford to FIRE but my spouse cannot although we would both like to".

I know people do this but personally I fund this very odd. Surely it would be optimal for both work until you are combined FIRE. The idea of totally separate pots is bonkers in this situation - we all bring different things to a relationship so why is money uniquely different.

"We can afford to FIRE but my spouse doesn't want to".

This is more difficult and perhaps closer to your situation in a few years' time. However, you say a few things;

1) You use the phrase 'stick it out' in relation to your spouse working until pension age of 55
2) You refer to three positive things in relation to your spouses' job which are simply financial
3) You mention that you consider your finances somewhat separate

So is this actually about finances, or is it a true desire to actually work those 17 years? That is the million dollar question I think. Your wording makes me think there is at least a chance it is the former. 

If it is, and from my starting point that I absolutely want to FIRE at the same time, then I would do everything to address this. First, I would be looking at the stashes/finances in combination and doing my calculations off this. Then, I would look at the equilibrium point where I work longer and because I earn a 'significant amount' more, we get to our collective FIRE number more quickly.

Linea_Norway

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #15 on: August 14, 2018, 07:05:41 AM »
I recommend listening to a podcast of the Mad Fientist. He has a podcast where he talks about his wife working full time for half a year at the time.

I have a friend who is 45-ish and her husband is in his 60-ish. Her husband has retired of old age. I don't know whether they have ever considered if she also could have retired. They have a teenage son.
The husband spends a lot of his time in the place where he was born, on the other side of the country. This is where he has his old friends. He is spending who summers building stuff. My friend is then alone at home, with a full time job and her son. She has to run the whole household alone during those periods and solve any acute problems alone. I know this has been tough for her sometimes. When the husband is at home, he does indeed do a lot of chores. This friend would not like to live with him up in the very north where he likes to spend most of his time. It is too much of a remote place for her.

Much Fishing to Do

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #16 on: August 14, 2018, 07:24:46 AM »
I think a lot of this thinking is effected by the traditional gender roles.  My wife has stayed at home raising the children for the past 14 years (ages 16/12/10 now).  As they are getting more independent, etc she has moved into some volunteer work, but admits she would rather never return to the work world again.  She obviously already has more than enough to do taking care of 3 children and a home and the community, and I don't think anyone would see her not working for pay going forward as odd even if the kids had all graduated this year and moved out.  And even if we had no kids I don't think this would seem that odd.  We may have gotten to the point this wouldnt seem that strange for the dad to stay home, but for a man to not work for pay under the age of 55 and without small children is probably viewed as strange.  And for neither of a couple to work at a young age seems impossible, but thats probably mostly b/c no one could conceive of how that would be possible anyway.  Whenever I would hear about a retiree before 55 a couple of decades ago I just assumed they were teacher/military/something else with a good pension.

Retire-Canada

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #17 on: August 14, 2018, 07:51:45 AM »
Has anyone else encountered a situation like this?  How did it go?  Did your spouse have any resentment toward you for FIRE-ing before them?  Do you have any thoughts or suggestions for ways to FIRE before your spouse without causing relationship issues?

Thanks in advance everyone.

I'm going to FIRE ~7 or 8 years before my GF...she is chasing a pension and she is a bit younger than me. I don't see this as a problem. I have lots of interests and hobbies I want to pursue. I can also look after more household chores so her work/life balance is better.

One thing I am for sure not going to do is work a full-time job just to kill time until she can retire. That's a waste of my most precious resource. I will coordinate my plans so that any time she has off we'll do whatever she wants to do and make the most of her holidays. Whenever possible I'll do my own stuff Mon-Thurs and then be home for the weekend to hang out with her.

I do want to do some longer trips and in those cases we'll plan for her to meet me after a month or so when she has holidays and then I'll keep going for another month or so after she heads back to work. That way I can be away for ~ 3 months without the time away feeling so long.

Ultimately you'll never get this time back and who knows how much time you have on this planet in that body so you better make sure you make the most of it. Working beyond the point where you need money doesn't seem like a good choice even if your wife is still going to work.

Candace

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #18 on: August 14, 2018, 08:25:47 AM »
I FIRE'd last year at 51. My DH is four years older than I am, like the OP's situation. We married later in life, I had built up a stash with the intent to FIRE. He is frugal in some areas of his life but spends what he does earn on dinners out, vacations for both of us and his two adult kids and spouses, and the like. He has almost no stash. He likes his job and doesn't really want to retire, though he is in a position to cut back, and says he wants to. However, he has a haphazard approach to work and accepting new clients/projects, so I'm not sure about his ability to manage his workload downward.

Pretty much, we've both been chill about my not working and him still working. I do most of the household chores, cleaning, shopping and cooking. I think that's only fair, and since our situation conforms to gender norms, we don't get much if any pushback. I do a lot of volunteering for organizations I care about, and spend a lot of time slacking and reading. I'm quite happy. I think he sees how nice I have it and sometimes thinks about making changes, but he's not that motivated yet. That's okay with me.

I'd like to travel more, but frankly right now my stash doesn't support much travel. Since I'm underspending my SWR, I'm hoping the stash continues to grow and will support more travel for both of us in a few years. I think he'd like to travel more too, but he can't both cut back working and increase spending. So, we're enjoying what we do in the local area.

I think one of the keys to our happiness is that neither of us needs for the other to be around constantly. When he's not working, he generally wants to be with me. But when he's working, I don't go hide under the couch or anything. I can find plenty to do. This is one of the reasons our situation works well. Also, partly as a result of getting together later in life, our finances are separate. We each have our agreed bills that we take care of, with me handling almost all of the "needs" like house and utilities, and him handling his separate "needs" like his car insurance, and the discretionary spending that he can't be talked out of, but provides some lifestyle perks I appreciate if I'm being honest. It's not exactly "fair", and certainly not what I would have chosen if I were sewing a husband together out of whole cloth. But hell, I have the stash, and what's that for if not to share with someone I want to be with?

So yes, I have a lot of time to myself and to make of what I will. But I don't mind. That's probably the key in my opinion.

FIRE@50

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #19 on: August 14, 2018, 08:54:53 AM »
My wife and I are very close in age. When I discussed FIRE with her at the beginning of the year, she said that she was on board with it but she wants to keep working. I'm interested to see if she still feels that way when the time comes, but I fully support her doing what she wants. She likes what she is doing and I suspect that she will be making a ton of money at that point. I still plan to have enough money for us to both FIRE and any income that she brings in will be a bonus. Our finances have been fully combined for as long as we have been married, so that isn't an issue for us.

Like many, my biggest concern at FIRE will be healthcare. I currently have health insurance through my corporate job and my wife is self employed. I'm hopeful that the US government will get its shit together by then, but in the meantime I plan to fully fund my HSA.

Mezzie

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #20 on: August 14, 2018, 09:58:45 AM »
I'm also in it until 55 because I love my job and have a pension plan. My husband is increasingly frustrated with his job, and I wish we were in a position where he could quit. I say, go for it!

markbike528CBX

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #21 on: August 14, 2018, 10:02:07 AM »
I FIREd on 6/1/18. Mrsmarkbike528cbx has moved to a downshift job4hrs/day, but works in education, so she's got the summer off too. I will be interesting to see if any discontent arrives when she has go go to work this fall, but literally just around the corner.   Mostly PTF.

Edit :   Mrsmarkbike528cbx is all of 5 weeks older.
« Last Edit: August 14, 2018, 01:16:53 PM by markbike528CBX »

Trifle

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #22 on: August 14, 2018, 10:12:42 AM »
I'll be FIREing early next year.  DH has been a SAHD for the past three years -- living the FIREd life essentially.  He wants to go back to work eventually, to stay busy etc.  But we've agreed that after I FIRE we'll do one full year with neither of us working, for some travel and full-on family time.  THEN he can go back to work if he still wants to. 

Down the road, I'm ok with the idea of being FIREd while he is working.  There may be times when I'll want to take a trip and he can't, but we'll figure it out.  That is a Mustachian People Problem.  :)

ixtap

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #23 on: August 14, 2018, 10:18:06 AM »
As with any FIRE, it really depends on how you spend your time and communicate with your spouse. For many couples, one person travelling for pleasure while the other goes to work could build some serious resentment. For other couples, it is fine.

I am underemployed, rather than FIRE (I have enough for a normal retirement, but not the extra 20 years if I were on my own). For us, it makes sense because I can do all the house work and most of the boat work. As such, when he has time off, we can usually do fun stuff, rather than chores and errands. It makes a huge difference to our quality of life as a couple.


Slee_stack

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #24 on: August 14, 2018, 01:08:43 PM »
DW and I are of the same age.  I would find it difficult to NOT work while she continued, particularly if the reason was financially motivated.

Neither of us love what we do.

BicycleB

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #25 on: August 14, 2018, 02:17:51 PM »
I think it depends on the couple, and how far from FIRE, and who brought in the money that you do have.

I am FIR(E)d...but maybe not for long. 50something, with just enough $ for me, not to support another person. Recently met Wonderful Lady Who Is Not FI. She is not spendy, but not financially oriented; debt free, but far from FI; slightly younger. My earning power is probably either equal to hers or more, depending on whether I can rebuild a professional income. If we marry, it seems obvious to me that for us a couple to become FI at our desired modest living standard, I will need to go back to work another 6 to 10 years while she also probably works most or all of that time. Details to be worked out going forward, following this thread with interest.
« Last Edit: August 14, 2018, 02:19:27 PM by BicycleB »

sui generis

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #26 on: August 14, 2018, 04:53:53 PM »
One question I have for the experienced folks here is about tax strategy.  So much of what I read about on blogs re: tax minimization strategy assumes you (whether single or a married couple) have pretty much zero income.  But for those with a spouse that is still working, are there qualitatively different approaches and does anyone spend a lot of time working on them (and want to share)?  Or just basically the same idea of staying within the lowest possible brackets?

I basically need to play around with our tax liabilities as a married couple with one large income and one small (I have a pension paying out now, so I won't be at zero even alone) and wondering if there are any tips I should keep in mind.

CoffeeAndDonuts

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Re: Thoughts on FIRE-ING before your spouse...
« Reply #27 on: August 15, 2018, 04:34:19 AM »
One question I have for the experienced folks here is about tax strategy.  So much of what I read about on blogs re: tax minimization strategy assumes you (whether single or a married couple) have pretty much zero income.  But for those with a spouse that is still working, are there qualitatively different approaches and does anyone spend a lot of time working on them (and want to share)?  Or just basically the same idea of staying within the lowest possible brackets?

I basically need to play around with our tax liabilities as a married couple with one large income and one small (I have a pension paying out now, so I won't be at zero even alone) and wondering if there are any tips I should keep in mind.

I know you mentioned seeking from those that have had one person fire. We've not but Ive done lots of modelling.

Our situation may be: enough for lean fire but one spouse that likes to work as an independent contractor for project based work. Currently full time but can scale up/down and sometimes it happens no matter what. Income from that is equivalent to about an $80k w2 job.

Firstly, it's incredibly situational so I'm just describing my findings. Yours may be very different.

While earning that much, health care optimization for our family of 3 is a big deal. Meanwhile, executing some 401k to Roth conversions is also important. I found that the ideal path was alternating high/low income years where low is around $40k magi for aca and high is around $77k taxable income which corresponds to the top of the fed 12% bracket where 0% ltcg stops

The reason is that is if we go low, we get big aca subsidization but we are likely actually spending down some of our post tax assets. If we go high, we can replenish the Roth ladder. Meanwhile, if we go steady state, the aca subsidy is disproportionately low due to the phase out being non linear.

Note that we choose to keep our mortgage due to mid 3's interest rate and as such our cash demands are somewhat higher than the average fire model with paid off home.

As to the how... Here's our bag of tricks:
* We have an i401k. We can deposit about $33k to $37k per year pre tax. That plus STD dedn pushes our income quite low.
* we have a solid Roth balance but need more and want to keep the pretax accts in check so Roth conversions are the likely strategy to bring income up.
* Wildcard that I'm still processing... Section 199 business income deduction applies to us, reducing taxable income from the business by 20%. Not sure how that will alter the interconnected Dynamics like aca qualification but I do know that in our low years, we will lose all benefit since you need some earned income. For us to get a full dedn value, I need to convert around $36k from a 401k to Roth while we'll see half of that as an addt dedn. That may not play well if it moves our low year from $40k magi to $58k magi.
* We also have some capital gains potential to do tax loss or gain harvesting. And it appears likely we'll have a large carry forward capital loss we can selectively use.
* I've not modelled yet how paying off our mortgage would affect things. Lowering our cash demands may allow us to stay in low magi point a lot more and the loss of leverage on the home may be offset by greater tax efficiency. I worry that tax efficiency, especially via aca, is pretty subject to change while I'll never get a mid 3's 29 year mortgage again.

Anyway, to truly optimize this requires a very specific analysis of your situation including:
* Cash flow needs.
* Break down of post tax, no tax, pre tax assets including run down rates on them.
* Consideration of future changes including income/spend events (e.g. college, SS, inheritience, etc).
* Identification of tools available (e.g. Roth ladder, HSA, i401k or sep, cap gains, donor advised fund, etc).
* Tons of math, time, and tolerance for tax speculation.

If that sounds fun, good for you (and me). If not, accept a simpler model without obsessing over perfect tax optimization. Perfect, in my scenario, only yields a pretty modest effective tax rate reduction. Maybe not worth the time especially considering I get it slightly wrong on occasion (sometimes my fault, sometimes last minute business income that I can't anticipated).

Fwiw, a few months ago, I made a spreadsheet that incorporates all of my tools and performs full 1040, sch a, c, aca, and several worksheets based on 2018 rates and how I read tax code changes. That was incorporated into a broader 10 year projection of cash flows, market returns, and projected balances. Probably my best spreadsheet ever technically. I played with lots of scenarios and found it useful in understanding Dynamics of different levers. It did reinforce how they worked but long term effective rates of our optimal strategy, as I said, didn't reduce all that much.

I hope this helps some but I'm sorry it's pretty non specific in terms of clear conclusion.