As a family law attorney for the past several decades, I’ve had the opportunity to see firsthand how financial trends in our society affect divorce and family law. One of the most relevant factors in a divorce is always how couples earn their money and what they’re doing with it. Now, with so many innovative earning opportunities in the 21st century, many individuals and couples are finding themselves driven to bank extra income and retire early. Experts have coined a term to refer to these couples: “FIRE.”
The Challenges FIRE Couples Face
“FIRE” stands for “financially independent, retiring early.” Generally, FIRE couples are younger than the average soon-to-be retiree; we see couples who fit the criteria as early as their 20s. These folks are often successful due to a tech job, a career as a professional athlete, or another lucrative career.
Despite the age difference, FIRE divorces actually have a lot in common with a gray divorce. Any time a couple is seriously considering (or is already in) retirement, there are unique financial considerations. You’ve worked hard to build your wealth, so you certainly don’t want your dreams of early retirement dashed because of your divorce.
So, can your dreams of a peaceful and financially stable retirement persevere even after a divorce? Most New Jersey divorce attorneys say yes – but with a few caveats.
Aim for Full Transparency and Cooperation
Even if you are dealing with a great deal of conflict during your divorce, you and your spouse both share the same goal – to remain financially independent and stay on your path to early retirement. You can both walk away from the marriage without derailing your plans, but you’ll need to be wholly transparent about your assets to avoid conflict. FIRE couples are more likely to have multiple investment accounts which must all be considered when trying to agree to a divorce settlement. Never try to hide these accounts from your spouse or her attorney.
You may also wish to cooperate with your spouse to reduce debts with your shared assets before divvying up everything else. If you’re being forced to liquidate certain assets to ensure you receive a fair division, consider using some of that money to pay off loans, credit cards, or other debt you may have accumulated. You can also do this individually after the dust settles, but you may be able to reduce your spouse’s and your stress by agreeing to pay everything off beforehand.
Early Retirement And Alimony
Many FIRE couples have built wealth primarily because of one spouse’s income. If you are a man with a high-paying job, you are likely concerned about alimony (AKA spousal maintenance) and how it may affect your long-term financial success.
In most cases, it is prudent to consider a lump sum to cover alimony. An ongoing payment will often put an unnecessary financial burden on the paying spouse, who must maintain liquid assets to cover these costs. If you plan to reinvest your share of the marital assets, a lump sum will offer you more options.
A FIRE divorce in New Jersey may be challenging, but by no means does divorce have to ruin your plans. Financial independence after divorce is possible, but divorcing FIRE couples should work together whenever possible to ensure the best outcome to their separation.
