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THINKING OF EARLY RETIREMENT? Try to Divide/2

October 6, 2024

If you have money invested for retirement this has been a pretty good time. Setting aside the ugliness of the 2000 and 2008 crashes, if you had $100,000 in an index fund in March 2009 when the SP500 bottomed out, that balance today is probably $650,000 without a dime of money added. Your $400,000 house is looking more like a $550,000 house in just a couple years. We like to think it’s our financial prowess, but any student of John Bogle (Vanguard’s founder) will tell you: “It’s the economy stupid.”

As people approach 55 and 60 many take a look at what they have saved, the mortgages they have retired and say: “I don’t want to work like this forever.” There is a two word equivalent for this attitude that rhymes with “bucket” but this is a family law blog.

We counsel clients to be cautious and to evaluate present and prospective expenses when looking at retirement. There are countless articles about whether you can draw 4% or 5% or devise some other formula to maintain a nest egg while living comfortably. Again, no rule of thumb is worth a damn until you get out the calculator and figure out what the cable and health insurance costs or whether it’s worth it to store a boat to sail it two weeks a year.

But, foolishly, what most married people ignore is the risk that their spouse has put them on the “bucket” list. The Census Bureau is on it. Gray divorce has been rising since 1990. Love and Loss Among Older Adults (census.gov). So, you sit down with your calculator and do a solid income, asset and expense analysis. When the smoke clears from the calculator you exclaim “Eureka, it can be done! Prepare the resignation letter.”

Two things are missing from this equation. The first is the possible impact of a significant and lengthy economic turndown. We saw brief and abrupt financial crises in 1990 (real estate bubble), 2000 (dot.com bubble), 2008 (crazy mortgage bubble) and 2020 (the Covid thing). The trouble is that none of us remembers 1929-1939 or 1837-1845. These were major, lasting depressions that wiped out a lot of people who entered them with immense wealth. We have done lots of things to shore up the markets like the Federal Reserve and securities regulation. But we live today in a global market where not only our own economy is struggling with $34,000,000,000,000 in public debt but the economies with whom we trade everyday (China, India) are listing a bit in the wind as well.

We don’t know how long we can work. But work has the twin benefits of reducing consumption (you’re at work or should be) and enhancing savings (no time to spend; automatic withdrawals for retirement). Suffice to say the older we get, the less attractive and capable we become as workers. And the longer you are out of the employment market the more challenging it becomes to return as you lose both skills and muscle tissue  in retirement.

But this is a family law blog. And as we circle back to your “Eureka” moment, pause to ask yourself, what does retirement look like on half the income and assets. Because if you and your spouse split, the nest egg gets divided as well. And once people retire, the likelihood of an even split of assets borders on 100%. The fact that you worked harder or gave up a career to raise kids three decades ago isn’t really moving the needle off an equal split. A big inheritance might change that answer but those waters of experience are largely uncharted by the courts.

So, stop, look & listen before jumping off the slow moving train called your career. Of course, you are the best spouse anyone could ever have and your spouse knows that and would never think of moving on to other pastures. Yea, right………