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Why would someone work when they are financially independent? And why would one spouse keep working while the other retires? A look into the whys and wherefores of delaying dual early retirement.
Many bloggers I follow in the FIRE space are married. This raises some interesting dynamics, most notably when I observe that one partner has retired while the other continues to work.
For some, the rationale is very clear, and it is explicitly stated by the blogger: they maintain separate finances, and when one person achieves their goal, of course they buy their freedom. But for other couples, I’ve often wondered what goes into the decision to have one spouse continue working while the other gallivants as a man or woman of leisure. When you have joint finances, why exactly is the second one working when they don’t have to?
Given my curiosity on the subject, I decided that when I had the chance, I would share our honest thoughts tackling the same subject. I can’t speak for what motivates others, but here are all the messy details of one couple making their retirement decisions. Ours.
Let’s summarize our financial situation.
- We have enough to cover our current, NYC-level expenses indefinitely using a 3% or less withdrawal rate. During my first year of retirement, our assets rose more than 10% in value, far exceeding this goal. Obviously we can’t bank on that happening every year, but a 3% withdrawal is feeling pretty conservative.
- Were we to move to a lower cost of living area, we could likely expand our lifestyle for kids and various other expenditures without spending more on an absolute dollar basis. NYC is 2-3.5x more expensive than most other parts of the country, including other urban environments which would offer us most of the amenities we like about NYC.
- We have cushion built into our plan as we are only using a 3% withdrawal rate when the best academic research suggests 4% is safe when back-tested against past performance data.
So what gives, Mr. Money Habit?
Liking The Work
Part of the reason Mr. Money Habit works is because he likes what he does, and he happens to be really, really good at it. I spent years lamenting the fact that there were things I liked and things I was good at, but very little that sat at the intersection of the two. I’ve always said that if you have something you enjoy that pays you lots of money, there’s no reason you absolutely must rush into early retirement. If retirement is the freedom to work on things you enjoy, but you are already working on things you enjoy, is retirement really a life upgrade? Most of us fall into the “not super excited about my paid career” camp.
Mr. Money Habit, on the other habit, is a bit of a special snowflake. He actually likes the role. If that’s the case, why tear him away? Just because I want to live my life a certain way doesn’t mean he must as well. If you asked him, he would admit that early retirement does appeal to him. If there were truly no financial perks to remaining in his role, would he still work for free? Probably not. So liking the work isn’t 100% of the reason, but it certainly factors into the decision. If he were miserable, he probably would have quit the same day that I did.
When Mr. Money Habit and I got engaged and it became clear we were going to be planning our lives together, I asked him to sit down with me and figure out what our target nest egg would be. To do this, I followed the same procedure I outline here. This involved building a budget of what our expenses would look like in retirement. He built his spreadsheet and I built mine. We came back to the table to compare.
My spreadsheet was researched line by line using data from residents in locales we were considering. I would look up the waste removal fees in Austin, TX or search forums in Denver, CO for an average family’s monthly grocery bill. I trawled Redfin and Zillow for homes in good school zones, and noted the average price of these homes. I had a number.
Mr. Money Habit, too, had a number. His figures were somewhat researched, but perhaps not as detailed. In addition, he added cushion in almost every line. Summer camp for the kids, vacation budget based on what we’ve spent in the past but padded with a little extra. When we added up the nest egg it would require to support that standard, his answer was north of $7 million.
$7 million! We’d never retire with that target in front of us. Less than 1% of households in America ever hold that kind of money at one time. We’d just work until we keeled over. This felt unrealistic to me, and I told him it was important to me to get more accurate figures rather than throwing in cushion in a thousand different places (in each line item as well as the withdrawal rate). Using cushion to substitute for hard analytical thinking might cost us decades of extra work, and I was unwilling to countenance that. He reflected on it and agreed it was reasonable to take a more careful cut.
Similarly, Mr. Money Habit looked askance at my original estimate. I had very little budgeted for enrichment activities for kids. My vacation budget was bare bones. He ran through several scenarios he wanted to be prepared for. If our kid wanted ballet lessons, was I just going to say no, we can’t afford it? I had budgeted a new car every 10 years – how sure was I that that would suit us? Couldn’t we estimate something more middle of the road like every 5 years?
We iterated on our budgets and they gradually converged. Still, it’s not surprising that two people with independent minds might never come to a consensus. Indeed, while we got within a few hundred thousand dollars of each other, we reached an impasse. We still maintain those differing “target numbers” today.
Part of the reason Mr. Money Habit still works is that there exist some items that feel like ‘necessities’ to him but ‘extras’ to me. Examples include the money set aside for the kids’ extracurricular activities,fancy summer camps for the children, and the type of house we’d live in. We were close enough in our target figures that we believed we could live a harmonious life, but the freedom was very important to me vs what I deemed extra luxuries, and his trade-offs were not quite at the same threshold as mine. He didn’t want to retire before he had enough to fill out some of the discretionary line items to his satisfaction (which is fair).
Following my plan to a T would feel like deprivation and a compromise to him rather than an achievement. Thus, I retired once we had exceeded my target number but below Mr. Money Habit’s true 100% comfortable target. We agreed that it was reasonable for him to work a little while longer to attain those extra items he felt strongly about.
Cushion, Cushion, Cushion
At some point you have to pull the trigger, but it’s a scary decision to hang up your working boots and let your skills atrophy. If something were to happen and you needed to go back to work, would you be employable? You hear this concern a lot in early retirement circles. The desire for just a little more cushion creates a desire to work “just one more year.”
Neither I nor Mr. Money Habit are immune to this. The idea of a little more financial cushion, especially knowing Mr. Money Habit enjoys most of his work, is appealing.
Too Many Major Life Changes At Once
When I was finalizing my actually retirement, we talked about what a major life change it would be. I might be incredibly happy, or find myself depressed and purposeless. I might get emotionally needier with no coworkers to serve as daily social interaction. Did we want two of us going through the same thing at the same time?
Perhaps if we envisioned a specific adventure we wanted to partake in together, such as travelling the world for a year, it would make complete sense to both quit at the same time. Indeed, as I was planning to quit we talked about the travel possibilities. But while we were mildly interested, it wasn’t a strong pull for either of us. My job had required a lot of travel. After dozens of cities, hotel mini fridges, and airport lounges, I was antsy not for seeing the world but for working on projects that felt more aligned with my interests from a stable, quiet place. I felt travelling would distract me from that rather than fulfill my biggest dreams.
Given that, it seemed wiser to stagger our retirements. One change at a time.
A complicating factor as we were considering dual retirement was the fact that we most certainly wanted children in the near future. You know what is as world-shattering and disruptive as changing your entire career? Having a baby. Did we want to have both of us making huge changes to our working life within a year of this other major change we were contemplating? What if having a child made us look at our entire retirement budget differently? What if we had a kid and decided we’d hate being primary caregivers and yearn for full-time work and the socialization that comes with it?
Our decision was to have me continue forward with my dream to retire and see how it went. Then we’d have a kiddo and see if that caused us to re-evaluate anything major about our financial plans.
Economic and Political Uncertainty
I don’t plan to get into a political debate here as this blog is about money and life. Suffice it to say that both my husband and I have felt particularly concerned about the direction of the economy and prospects for US prosperity given recent political events and legislation being discussed. In our eyes, we should have a clearer handle on things in 12 to 24 months. It makes a lot of sense to have one of us at peak marketability in the career department should things look poor for our financial trajectory. The time period of this uncertainty aligns with an ideal time period for the reasons described earlier, so it doesn’t feel like a particularly large sacrifice to play “wait and see” before pulling the trigger on his retirement.
As with many of life’s major decisions, no one simple fact motivated the decision for Mr. Money Habit to keep working even though we are both financially independent. In the gray zone of earlier freedom vs. ‘more cushion, more luxuries, more clarity,’ we are all forced to prioritize. However, there is in fact a range rather than only one point on the spectrum which could be considered a reasonable mix of the two.
When Mr. Money Habit and I found ourselves forced to make a decision in this gray zone, we decided to resolve the issue with a staggered retirement timeline. Retiring with more than 50 years of life to finance is exciting, but also terrifying. The staggered timeline allows us to build a mix of freedom vs more cushion/more luxuries/more luxuries that meets both of our needs. That’s the truth of one couple who wrestled with the decision, and we are still watching the results of our decision unfold. I hope it helps others going through their own discussions on the topic.
What about you? Do you and your partner agree on your target retirement figure? Those who retired early, did your partner retire at exactly the same time and why / why not?