Hey Post-FI's/RE's

[outtaheresoon]

Kinda having a hard time constructing my question...how did you know you were at a point where you could stop working and not worry?  I have a high level understanding of what it takes to FIRE (have a stache large enough to cover annual expenses without drawing down the principal), but I am not sure I am considering everything I should. 
Our current stats: Him 50, Her 60.
401ks
Him $650k
Her $510k
Cash $145k
House value $390k, Mortgage balance $128k.  After commissions and fees will walk away with about $224k
No other debts
Annual spend is $48k (but that should drop after moving and no job expenses i.e. gas/tolls/having more time to cook etc.)
We plan on moving to a LCOL area so the equity ($224k) in our current home would hopefully cover the entire cost of our retirement home (after renting 6-12 months)
The plan is to build our cash up to $200k and then draw down that (while the 401ks continue to hopefully grow) until we get down to a years expenses ($40k) then start drawing down on her 401k first then his.
As for medical expenses, she wants to continue to work at least part time to have something to do and hopefully we will have medical through her job - but if not what is the best way to determine health care expenses?
What else am I not considering?  Based on our 401k and cash balance we are pretty close (I think) but I don't feel I have gotten down into the 'weeds' in determining exactly what we should be taking into account.  We would like to be able to hold off collecting social security until each is 70 to get the maximum amount, but if needed we could start earlier say at 67.  Hope this makes sense.....Thanks for any input.

[Financial.Velociraptor]

Kinda having a hard time constructing my question...how did you know you were at a point where you could stop working and not worry?  I have a high level understanding of what it takes to FIRE (have a stache large enough to cover annual expenses without drawing down the principal), but I am not sure I am considering everything I should. 
Our current stats: Him 50, Her 60.
401ks
Him $650k
Her $510k
Cash $145k
House value $390k, Mortgage balance $128k.  After commissions and fees will walk away with about $224k
No other debts
Annual spend is $48k (but that should drop after moving and no job expenses i.e. gas/tolls/having more time to cook etc.)
We plan on moving to a LCOL area so the equity ($224k) in our current home would hopefully cover the entire cost of our retirement home (after renting 6-12 months)
The plan is to build our cash up to $200k and then draw down that (while the 401ks continue to hopefully grow) until we get down to a years expenses ($40k) then start drawing down on her 401k first then his.
As for medical expenses, she wants to continue to work at least part time to have something to do and hopefully we will have medical through her job - but if not what is the best way to determine health care expenses?
What else am I not considering?  Based on our 401k and cash balance we are pretty close (I think) but I don't feel I have gotten down into the 'weeds' in determining exactly what we should be taking into account.  We would like to be able to hold off collecting social security until each is 70 to get the maximum amount, but if needed we could start earlier say at 67.  Hope this makes sense.....Thanks for any input.

If you are indexing your investments or at least broadly diversified...you need to follow the 4% rule.  That is, you need 25 times annual expenses saved to support withdrawing 4% of the current balance each year (growing with inflation) into perpetuity. 

48k * 25 = 1,200k bones.

You have 650k + 510k +  145k + (home) = 1,305k plus a home equity buffer.

You are more or less ready to go and can improve the situation by moving to LCOL area and having some surplus from home equity cash out left as cash after purchasing a new home.  For comparison, you can get 4 bed 2 bath 1900 square feet homes outside the city center in Houston for about 110k.  Alabama is even cheaper.  So this is very doable. 

You might want to look into this thread: https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/ on how to get your 401k funds out early without penalty.  You might be well served with a 'section 72t' withdrawal scheme in one IRA.  The other would be ready for regular distributions by the time you depleted your taxable account cash by then. 

Hope this helps.

[respond2u]

It doesn't sound like you're taking property tax and homeowner insurance, maintenance, etc. into account for shelter expenses. Even if you "buy", you're really only renting from the county.

Other than that, it looks good.

I notice you didn't mention Social Security (or equivalent) as a source of income. Your wife might be eligible to start drawing soon, and that might increase your sustainable withdrawal rate.

[ysette9]

With your ages and likely number of years in the workforce, you SS income is probably more significant than the typical early retiree around these forums. That means you have even more buffer in your numbers than the >25x spending indicates.

I recommend you get some SS estimates and then play around with cFIREsim.com to see what the historical simulations give. I suspect you will be pleasantly surprised by how much margin you have, provided you have a good estimate of what your expenses are and you have a good asset allocation in low-cost funds. The interface can be a little tricky at first, so feel free to come back and post more questions if you need to double check your inputs.

[deborah]

One thing people do overlook is how they are going to get income from the bundle of money they estimate they have. If you have index funds, you get whatever they pay out in income each year, but if some of your money is in other investments, you need to work out how much income that will give you. You also need to work out how you will get the money into these investments. If part of your money is currently sitting in the house you are sleeping in, it won't be able to give you income until you sell the house. So you need to work out whether you have enough income now if you are going to pull the plug now.

[respond2u]

The amount you can withdraw from SS increases at 7-8%/year every year you delay taking it up to full retirement age, so unless the market tanks soon and the retirement funds get hit extremely hard it probably makes best sense to delay taking SS until at least full retirement age.
<snip>

It's not a financial calculation, it's a gamble.

I know people over 70 that have enough time and money to travel the world but can't because of infirmities.
I know people that have died before they hit 67.

I know that 62 is much closer to my age than 67 or 70, and feel that the value of an extra $20K/year (for me) at 62 will be far more than delaying for 5 years and then starting off with $30k/year or delaying for 8 years and starting off with $38k/year (and the latter assumes that the benefit hasn't been reduced by the insufficient funds problem).

Of course, if I win the lottery before hand, I'll delay starting it.

[respond2u]

HI Lhamo--that's a great reply! Thanks for taking the time to write what I'd wish I'd written : )