What am I missing?

[Finally FI]

Hello everyone!

I’ve been a saver for most of my life. I bought a house when I was 26, and became laser focused on becoming mortgage free. After some wonderful but costly relationship changes and some job and life related moves that resulted in buying progressively more expensive houses, I finally got there 23 years later.

I expected to spend more after that event, but my DW and I seem to be hardwired not to, stockpiling most of our income for the years since then with the only clear plan being sleeping better at night.

Then in 2020 I was introduced to FI, filling in the “what’s next?” and “how much do we need?” blanks. Through knowledge from multiple forums and podcasts and FIRECalc, it appeared we were already there. Since we mostly liked our jobs and coworkers, and suspected a market correction was coming, and had paranoia about what-ifs, we continued to work and stockpile.

But each year, we’ve experienced an increasing number of friends, family, and coworkers that have passed away or been diagnosed with something bad, and I’ve been finding myself less able to find time to do many things I’d like to.

So, I just pulled the trigger and began the retirement process at work. DW is younger and wants to keep working, but I want to make sure that’s optional in case she changes her mind.

I’ve tracked our spending by simply adding our monthly credit card, HSA account, and check totals. Annually we’ve been under $40k, including healthcare but not including health insurance, major home renovations, or vehicle replacements. Adding $20k for health insurance (completely a guess) and $5k for infrequent vehicle purchases (actual is probably lower) puts the annual total at under $65k.

Plugging our numbers today into FIRECalc Investigate shows 100% success for $126k. With about 2/3 of our investments pre-tax, that should put after-tax at over $100k.

According to history, can we really both stop working and spend more than twice what we’re used to ($35k more a year) and be fine? It’s really hard to wrap my mind around that.

Am I missing anything?

While I’m excited about the thought of having more time to do all the things I’d like to, the financial uncertainties are quite scary for me.

 

[COcheesehead]

Don’t forget about fun, lumpy expenses like cars, insurance deductibles, LTC…

 

[SevenUp]

Plugging our numbers today into FIRECalc Investigate shows 100% success for $126k. With about 2/3 of our investments pre-tax, that should put after-tax at over $100k.

According to history, can we really both stop working and spend more than twice what we’re used to ($35k more a year) and be fine?

Yes, that is what FIRECalc is meant to show.

You could try some other tools to see if they think likewise: The Best Retirement Calculators - Can I Retire Yet? lists some.

 

[pacergal]

Don't guess about insurance, check the ACA website and cost it out.

Also, in the forums, check out the early retirement FAQ for this one:
Some Important Questions to Answer Before Asking - Can I Retire?

Answer all of the questions, completely and honestly to check yourself.

But just from what you have posted, it sounds like you are ready to go, especially if your wife continues to work and you can get medical insurance from her.

 

[Whisper66]

Include Social Security in your input but ensure your numbers account for no future income. There’s a calculator on the SS website you can use.

 

[Finally FI]

Thanks for the replies!

Don’t forget about fun, lumpy expenses like cars, insurance deductibles, LTC…

I have the extra annual $5k for cars. We try to buy slightly used (1 to 3 year old) historically reliable (according to CR) vehicles and run them until their repair costs become higher than their value; typically 15 to 20 years.

Insurance and healthcare deductibles have been captured on our credit cards and HSA account, so I believe those are included.

Our largest lumpy expenses the past few years have been major upgrades and renovations to our home, like replacing everything exterior with long-lasting alternatives rather than wood.

Are there other lumpy expenses that typically surprise some retirees?

 

[Finally FI]

Yes, that is what FIRECalc is meant to show.

You could try some other tools to see if they think likewise: The Best Retirement Calculators - Can I Retire Yet? lists some.

Thank you for that link! I ran through 6 other calculators and all show success between $110k and $136k.

 

[Finally FI]

Include Social Security in your input but ensure your numbers account for no future income. There’s a calculator on the SS website you can use.

Thanks! I set up SS accounts for myself and DW last year, and have those real projections. It haven't found a way to add an income estimate for just this year, so the figure I've been using has been with zero income for 2022, which should be low and result in a slightly higher actual.

 

[Finally FI]

Don't guess about insurance, check the ACA website and cost it out.

Also, in the forums, check out the early retirement FAQ for this one:
Some Important Questions to Answer Before Asking - Can I Retire?

Answer all of the questions, completely and honestly to check yourself.

But just from what you have posted, it sounds like you are ready to go, especially if your wife continues to work and you can get medical insurance from her.

Thanks for the ACA check recommendation! I hadn't checked the ACA website in a long time. It's much more user friendly than I remembered. With $50k for income, which should cover our planned Roth conversions, most plans were about $20k total between premiums and maximum out of pocket, which should be the worst case scenario. That's actually less than I had estimated, which was $20k premiums plus $8k out of pocket!

I had reviewed the FAQ - Some Important Questions to Answer Before Asking - Can I Retire? Since I'm financially paranoid, I tend to be brutally honest with myself, trying to think of every "what-if", which is what prompted my question about what I might be missing. I don't know what I don't know, and am very appreciative of all of the knowledge that people continue to share in FIRE forums!

DW and I do know that as long as she works we're in great shape. But sometimes her job can be very stressful, so I want to make absolutely sure we're good whenever she decides she wants to retire, also.

 

[COcheesehead]

Make sure you understand and plan for return sequence risk. I know Firecalc takes that into consideration, but when you face it head on, you should be prepared.
I retired in 2020 and have now experienced two bear markets in that time span. The day you start to live solely on your savings and then potentially have those drop by 20% or more, is a reality check.

 

[flyingaway]

Enjoy your retirement.

 

[Finally FI]

Make sure you understand and plan for return sequence risk. I know Firecalc takes that into consideration, but when you face it head on, you should be prepared.
I retired in 2020 and have now experienced two bear markets in that time span. The day you start to live solely on your savings and then potentially have those drop by 20% or more, is a reality check.

Thanks, yes.

I learned my lesson with the dot com crash, buying stocks near the peak in 1999 and selling at the low about a year later for an 82% loss. Like most others, I watched my retirement funds get cut in half in 2008/2009, but knew not to touch it.

So only about 2/3 of our portfolio is in the market, currently down about 20%. The other third is sitting in bank accounts and cash-value pensions, exactly for that reason - SORR. I need to do something with it to get a better return, but one that's stabile.

I have been trying to figure out how to optimize withdrawals, and just found the "What drawdown method do you use?" threads referenced in the FAQ, which have been very informative.

 

[Finally FI]

Enjoy your retirement.

Thank you!

 

[Gumby]

....
Are there other lumpy expenses that typically surprise some retirees?

Do you have pets? We spent over $6k on our cat's final 3 months of life this year to unsuccessfully treat her for cancer. The two years before that, we spent in excess of $6k each year on her sister cat. The first year to successfully treat her for cancer and the second year to unsuccessfully treat her for congestive heart failure. Fortunately, we have an incredible amount of margin in our plans, so it has not derailed us. But it was a surprise; my spending plans included normal veterinary and cat maintenance expenses, not ones that large.

 

[NW-Bound]

I’ve tracked our spending by simply adding our monthly credit card, HSA account, and check totals. Annually we’ve been under $40k, including healthcare but not including health insurance, major home renovations, or vehicle replacements. Adding $20k for health insurance (completely a guess) and $5k for infrequent vehicle purchases (actual is probably lower) puts the annual total at under $65k.

Plugging our numbers today into FIRECalc Investigate shows 100% success for $126k. With about 2/3 of our investments pre-tax, that should put after-tax at over $100k..

Well, you have a big enough margin that I don't think that missing a few items will matter much.

That's the situation I find myself in now, spending so little compared to what we can.

So, congrats on your ER. You are safe.

 

[RetireBy90]

Make sure you understand and plan for return sequence risk. I know Firecalc takes that into consideration, but when you face it head on, you should be prepared.
I retired in 2020 and have now experienced two bear markets in that time span. The day you start to live solely on your savings and then potentially have those drop by 20% or more, is a reality check.

Just as one option, I retired with 3-4 years of expected spending in cash so if we hit bear market that year we could just spend the cash rather than sell in a down market. I was so paranoid until I had lots of buffer for something I missed and also became aware that life is full of adjustments, so why should retirement be any different. You have adapted to changes this far, you can continue to adjust in retirement.
For me, important part was FI. Work if I want, don’t if I don’t want to.

Congrats on FI

 

[COcheesehead]

Just as one option, I retired with 3-4 years of expected spending in cash so if we hit bear market that year we could just spend the cash rather than sell in a down market. I was so paranoid until I had lots of buffer for something I missed and also became aware that life is full of adjustments, so why should retirement be any different. You have adapted to changes this far, you can continue to adjust in retirement.
For me, important part was FI. Work if I want, don’t if I don’t want to.

Congrats on FI

I set up a bond ladder that throws off more income than what we need. It carries us to full social security at 70. I don’t need to touch equities and not have much of a cash drag. With the pop in fixed income, the ladder now throws off almost 70% more than when I first constructed it.

 

[Finally FI]

Do you have pets? We spent over $6k on our cat's final 3 months of life this year to unsuccessfully treat her for cancer. The two years before that, we spent in excess of $6k each year on her sister cat. The first year to successfully treat her for cancer and the second year to unsuccessfully treat her for congestive heart failure. Fortunately, we have an incredible amount of margin in our plans, so it has not derailed us. But it was a surprise; my spending plans included normal veterinary and cat maintenance expenses, not ones that large.

We do, and also have periodically spent a lot for veterinary surgeries and specialized tests and medications. Good to keep in mind!

 

[Finally FI]

Well, you have a big enough margin that I don't think that missing a few items will matter much.

That's the situation I find myself in now, spending so little compared to what we can.

So, congrats on your ER. You are safe.

Thank you for sharing that! I've been wondering if our spending would change significantly; if that's something that just happens in retirement due to extra free time.

Based on my anxieties about money and our habits remaining the same even after we became mortgage-free, I guessed not. And also because we live really well, and have already splurged on the things that matter the most to us, like our home, which is in an amazing location and set up well for us.

What you shared is great to hear.

 

[Finally FI]

Just as one option, I retired with 3-4 years of expected spending in cash so if we hit bear market that year we could just spend the cash rather than sell in a down market. I was so paranoid until I had lots of buffer for something I missed and also became aware that life is full of adjustments, so why should retirement be any different. You have adapted to changes this far, you can continue to adjust in retirement.
For me, important part was FI. Work if I want, don’t if I don’t want to.

Congrats on FI

Thanks! About 1/3 of our portfolio is currently in bank accounts and cash-value pensions. That appears to be about 10 years spending at the higher level that includes health insurance and DW retiring. I think 3-4 years cash, like you, is probably better long term, so I need to figure out a higher interest but non-volatile place to put the rest.

 

[Finally FI]

I set up a bond ladder that throws off more income than what we need. It carries us to full social security at 70. I don’t need to touch equities and not have much of a cash drag. With the pop in fixed income, the ladder now throws off almost 70% more than when I first constructed it.

That sounds great. I'm going to have to educate myself more about bonds. My BIL used his FA to buy muni bonds, which I believe have tax-free interest and are doing well, but the bond funds available in my 401k are down significantly this year.

Are there any websites or forum threads that are beginner-friendly that explain details about bond types and compare their costs and rates and taxes?

 

[old medic]

1st off congratulations on your retirement. It appears you have several legs on your retirement stool, and more than enough for your survival expenses. Similar to you, DW is still working. Shes padding her 401K to keep ACA rates down. We pay the bills, and split the leftovers, Half to savings, half to just enjoy.

 

[Finally FI]

1st off congratulations on your retirement. It appears you have several legs on your retirement stool, and more than enough for your survival expenses. Similar to you, DW is still working. Shes padding her 401K to keep ACA rates down. We pay the bills, and split the leftovers, Half to savings, half to just enjoy.

Thank you!

We'll be changing to DW employer's health insurance next year. With her contributing the maximums to 401k and HSA, and with the health insurance costs pre-tax, her leftover take-home, taxable income will be very small. That should put us in a good place for ACA if she needs to stop working. If she works the whole year, we plan to do Roth conversions next December to the top of the 12% bracket amount.

 

[Finally FI]

Even though I see and understand the numbers and have verifications from retirement calculators, it still doesn't seem real. It's like my financial anxieties from trauma in my younger years are preventing my mind from accepting it all, and instead are staying on high alert for what-ifs. Or maybe it's mentally popping out after so many years of laser-focused accumulation to get to a safe place.

Is that common?

 

[COcheesehead]

That sounds great. I'm going to have to educate myself more about bonds. My BIL used his FA to buy muni bonds, which I believe have tax-free interest and are doing well, but the bond funds available in my 401k are down significantly this year.

Are there any websites or forum threads that are beginner-friendly that explain details about bond types and compare their costs and rates and taxes?

Bonds are actually pretty simple to understand. I would start with this overview from Fidelity.

https://www.fidelity.com/learning-c...fixed-income-bonds/fixed-income-learning-path

There are also some really good individual bond threads on this forum.