I know it’s hard to imagine ever leaving your soon-to-be husband or wife.
It’s true love. From the minute you met, you felt like you had known each other forever. You can’t stand the daily grind keeping you apart from the other half of your soul for one more minute. You have the same goals, you’ll never get sick of each other, and you’ll always finish each other’s sentences non-ironically. You’re going to ride unicorns into the sunset together under a series of perfectly-aligned double rainbows. You’re not like the Normies.
Would you get married – giving up all your freedom and happiness forever in exchange for some person to share the burden of children with1 – if you didn’t feel that way? My fiancée and I wouldn’t!
Mrs. Vigilante3 and I are pursuing financial independence together. We obviously hope that everything works out – especially the unicorns and double rainbows. But just in case, we have established a plan and a promise through which we can cut ties and not damage one another beyond recovery. We’re taking a practical (or tongue-in-cheek “post-romantic”) approach to marriage, like Mr. and Mrs. ONL. If the worst happens, we want to make sure we can just go our separate ways with the knowledge that neither of us is going to leave the other starving. Or worse, returning to work.
Yep, we drafted a prenup.
Most people seem to think that prenuptial agreements are for the wealthy and for celebrities who might run for president someday. But prenups aren’t just for the rich and famous – they have value for the Average Joe.
How much value? Well, a quick Google search shows that the ever-reputable About.com says the average divorce runs about $15,000 in legal fees alone (not counting support payments or assets lost in a marital settlement agreement), which sounds about right to this divorce attorney, given a moderately contentious divorce. For simplicity, let’s assume the Average Joe and his soon-to-be wife have $100,000 in assets (all of it earned during the marriage) and no debt. Let’s assume they divorce, and all of it gets split right down the middle. No spousal support or alimony. This divorce costs Average Joe $65,000 between fees and half of the assets. If there’s only a 20% chance of divorce for any new marriage – an extremely generous guesstimate – that’s an expected cost, as of the date of marriage, of $13,000 for going prenup-free ($65,000 x .2 = $13,000). Compare this to an average cost of $1,000-2,500 for the type of prenup that would serve most FI-er’s needs according to this even more reputable source.4
Prenups have extra value for the financially independent, given the substantial assets saved. In my opinion, they are pretty much mandatory for early retirees, given the potential difficulty both parties face re-entering the workforce if necessary after a long sabbatical. In many industries, nothing says “hire the next guy” like six years of empty space on your resume.5
Even if you have pretty much nothing going into the marriage, like The Vigilante and Mrs. Vigilante, a solid prenup could easily be the difference between continued financial independence and returning to, well, dependence from divorce til death. Aside from death and severe disability, divorce is the single most dangerous life event to your financial independence. Why not protect yourself against it, which can be conveniently accomplished by having exhilarating6 conversations with your significant other about finances, which is something you should be doing anyway?
Here’s the rub: Divorces are costly.
There are legal fees – and while it may be self-serving to say so, you do want an attorney, as the costs of litigation are usually less than the costs of a bad marital settlement agreement or a misinformed agreement for support. At least for assets (and sometimes, to an extent, for support and alimony calculations), there are no do-overs.
You will face some form of division of assets and debts. Some form of spousal support or alimony is all but guaranteed if requested. And you might possibly owe alimony payments for years beyond the actual separation.7
At least in our state, anything that was accumulated before the marriage would be yours to keep by default. But increases in value on those assets, and assets accumulated during the marriage, would be up for grabs in “equitable distribution” – meaning you could end up splitting the vast majority of your assets 50/50, or you could spend money, stress, and time trying to convince some attorney to give you more than half because it’s just the fair thing to do. And, of course, you could lose more than half.
Wait, hear that? I think our retirement bucket sprung a leak. Drip, drip.
A Vigilante Household in a Normie World.
You could also run into problems with spousal support. Take my situation, for example. I’m an attorney, and Mrs. Vigilante is a paralegal. We have a mutual goal to be financially independent and cease full-time work in our late 30s. Right now, my salary is only slightly higher than hers. But mine is rapidly increasing (plus I have the opportunity for a myriad of bonuses based on different ways which I might contribute to my firm) and her salary will be relatively stagnant, with pretty much only cost of living adjustments over time.
Say we both go part-time 9 years from today, and in 12 years we retire. Then, in 15 years, we get a divorce. In our state, if a party won’t consent to the divorce and you don’t want to spend a hefty amount – I believe the legal term is fuckton – of money and time trying to litigate some reason for the divorce, then the party who wants the divorce has to wait for a two-year period to elapse before they can get the divorce without consent. During that time, either party may be entitled to collecting spousal support (or what is called alimony pendente lite, or APL, which is the same for FI purposes).
Mrs. Vigilante, if she wants to get back at me for how horribly I slander her on the internet, could end up suing me for APL and dragging out the divorce for as much as two years. Even if she decided to leave the marriage against my wishes! I wouldn’t expect her to do it if she’s capable of supporting herself, but people – and their priorities – all too often change in divorce. Plus, she may have an attorney who strongly recommends it. Especially if that attorney knows me.
If she sues for support, the courts might hold me to an “earning capacity” based on my training and experience. This means I end up paying support as though I’m a full-time attorney with 20-some years of experience, even if I have “retired.” No exceptions for FIRE – “He could work if he wants to!”
This is a really dangerous law for FIRE enthusiasts. It’s not going to happen in every case, but it also isn’t rare. If Mrs. Vigilante wises up and leaves me, it could cost me tens of thousands of dollars in payments to her over two years, potentially making the difference between my portfolio’s success or failure – especially if the divorce is early in our retirement and accompanied by a market downturn.8
Spousal support and APL are intended for the purpose of helping a spouse “maintain a standard of living,” particularly where you have one spouse who is a high earner and another who either doesn’t work or works for far less income and with limited education and/or experience. This standard of living is based on a calculation which assumes lifestyle inflation with income: If the parties earned $120k per year, it is assumed that they spent $120k per year.9
The thing is, Mrs. Vigilante and I live in a Vigilante household in a Normie world. Aside from student loan payments, we live on about minimum wage expenses regardless of our income. If Mrs. Vigilante collects support at the rate she should based upon my earning capacity as an experienced attorney, she would actually be able to drastically increase her standard of living at the expense of my retirement!10
The result of applying the standard calculation to us is that I would have to go back to work, potentially for decades, to make up for the cost of the divorce. She would continue to live a FIRE lifestyle, although perhaps much more extravagant than what we had planned. I’d have no relief in the law, because I owe her what I could earn, not what it is reasonable for us to spend.
Divorce law is one-size-fits-all. A prenup is a finely tailored suit (but cheaper!)
A good prenup can resolve feuds over marital assets before they begin. It can resolve issues of support and alimony in a positive way while both parties still want what is best for the other and aren’t simply trying to stick it to the other guy.11 Most importantly, it can save the couple a lot of time, money, and stress, and help both move on in the event of a divorce.
A prenup is not about “cutting out” your spouse. It is not a plan to divorce or an admission of a lack of love or faith in the relationship. Rather, a prenuptial agreement is a way for each of you to admit to one another that you aren’t in it for financial gain only.
Perhaps more importantly, it’s the start of an ongoing conversation about money, finances, and ultimately values that may help make the marriage last! I ‘d bet my life (and in fact I am, by getting married soon!) that the couples with the best chance to stay married are the couples who know and plan their lives together, including financially.
Prenups don’t just protect you in the event of divorce: They make your investment in marriage stronger.
Curious about the Vigilante Family’s prenup? Check out this post for all the juicy details!
- Kidding, of course. Children are a blessing and in no way suck your very soul out of you with more ease than they get the juice from a straw. Half of which ends up on your brand new hand-woven white rug. Damnit, Lilith!
- Or possibly not. It may depend on whether you include second and third marriages, whether you consider divorces and marriages amongst all groups simultaneously or follow specific clusters of married couples, and any other number of variations in compiling statistics. But would you be as confident in your financial independence plan if you reassessed your odds of failure and adjusted for even a 10% chance of divorce, knowing with near-certainty that a divorce, if you don’t have a gigantic cushion, would result in the failure of your portfolio? The exact divorce rate is irrelevant: Divorces are tough, costly, and dangerous, especially to an early retiree.
- Who I am going to refer to as the “Mrs.” despite the lack of a ring on my finger. We live together, share finances, and her grandmother would be very upset to know about our lifestyle. So we’re comfortable with the characterization for the next few months until we actually tie the knot.
- Sarcasm, as far as reputability. But again, these seem like reasonable numbers based on experience. The prenup I prepared for myself would have run about $1,500-2,000 in my location, with an attorney representing myself and another representing my fiancée.
- Although this certainly varies according to many factors. You might have specialized skills that you continued to develop as a freelancer during your retirement, and you might seek out an employer who has great respect for your ability to do that and the stories you can tell. But I like to hedge my bets, so I’m not banking on that: Hope for the best, prepare for the worst. Pretty sure that’s a Vigilante Original.
- Give or take a few emotions.
- We’ll leave out child support, because supporting your children is usually a separate issue. In my state, child support is never, ever able to be waived, but all of the other costs listed above are.
- And isn’t that the perfect time to get back at me for this post?
- Less taxes. But what kind of Vigilante pays taxes at anywhere near the rate assumed for their gross annual income?!
- And, obviously, vice versa if Mrs. Vigilante changes careers and substantially out-earns me, or if I become disabled or otherwise unable to earn that kind of income.
- At least I hope that’s how Mrs. Vigilante feels about me?