CASE STUDY - I think we are FI, but are we able to RE?

[Sticker]

Hi there~

First ever post so please be nice :)

I'm new to the forum and would like some general feedback. I *think* we are in a pretty good position to RE but I'm afraid it's a little can't-see-the-forest-for-the-trees - sometimes it seems like we're set, and other times I'm convinced ER is nuts because we may need millions upon millions like all the prevalent financial literature tends to report! 

Husband is especially burned out. He works in a creative industry and logs long hours of very challenging mentally draining work in a fairly toxic environment but he is also exceedingly pragmatic and financial security is a big priority. He is also incredibly loyal and dedicated to the work he does. My job can be tedious at times but usually allows a lot of flexibility and autonomy. There are a few months out of the year that are particularly difficult but most of the year the work/environment are manageable - maybe even enjoyable!  Here are our specifics:

SITUATION: Married filed jointly. I’m 39 husband is 47. No dependents. We live in Brooklyn, NY.

SALARY: 
Mine = $90,000
His = $ 80,000
TOTAL SALARY: $170,000 total

PRE-TAX DEDUCTIONS:
$36,000 into our 401Ks
$2,400 / year for health insurance
$2,400/ year combined for transit

POST-TAX DEDUCTIONS:
$11,000 total /year - We have Roth IRAs and fund them annually

OTHER INCOME:
$12,000/year = Pension from father-in-law. This continues annually until father-in-laws death.

$40,000 = Investment distribution (inherited from grandfather) this pays out quarterly and comes out to about $40,000/year. This will continue indefinitely.

$4,000/year = husband owns a rental property out-of-state with his brother. Its owned outright and is rented with a management company. He makes $4,000 year on the rent.

Husband has started a side-gig that will likely be a small annual project for $5,000. Not sure the taxes on this yet, as 2016 was the first year for new side-gig.

TOTAL OTHER ORDINARY INCOME = $62,000

AGI: Not totally sure (still working on our taxes and the $40,000 investment distribution and $12,000 pension are recent additions so some of this is still being sussed out) in 2015 our AGI was $160,000  guessing it might be around $180,000 for 2016.

TAXES (2015):
Federal (mine)  = $12,301.97
Federal (his) = $11,020.50
State (mine) =  $3,598.28
Sate (his) = $3,267.90
Local (mine) = $2,234.10
Local (his) = $2029.73
Social Security (mine) = $5,352.59
Social Security (his) = $4,482.80
Medicare (mine) = $1,251.81
Medicare (his) = $1,048.40

TOTAL TAXES ( MINES) = $24,738.75
TOTAL TAXES ( HIS) = $21,849.33

EXPENSES:
Mortgage = $1,118/month ( we pay $2,000 currently)
Maintenance = $650/month  ( will likely increase to $710 soon)
Electricity = $50/month
Gas = $18/month
Internet = $70/month
Netflix/HBO = $25/month
Gym = $90/month total ( $45/month each)
Groceries = $100-$150 /week. About $500 / month.
Eating out / restaurants = $500 / month
Cell phone= $143/month ( for both, but work pays)
Therapy = $1,600/month
Miscellaneous spending = $800. $400 each/month.

TOTAL EXPENSES = $5,421

Expected ER expenses: Health insurance is a big question mark. Not entirely sure whats going to happen with ACA/ Trumpcare.

We do want to travel quite a bit in retirement, and, although we like our apartment/neighborhood in Brooklyn we would be open to moving to the Midwest ( possibly Chicago or Minnesota where we both have family).

No children/dependents and no plans for any ( other than a dog!)

ASSETS:

REAL ESTATE:
We bought our apartment in 2013 for $345,000. We owe $200,000 on it currently. Property values have increased significantly in recent years but haven’t had it appraised recently.

Investment property (owned outright, husband owns 50%) appraised at = $328,000

401k (mine) $336,000
401k (his) $59,000
rollover IRA ( his) $4,800
IRA ( his) $141,000
IRA ( mine) $165,000
Vanguard non-retirement brokerage account: $500,000
Other non-retirement brokerage account: $30,000
Capital One Savings account:  $268,000
Chase savings account $115,000
Discover Bank savings account $28,000

TOTAL ASSETS (not including real estate) = $1,646,800


***don’t facepunch too hard for all the cash on hand!  We were seriously considering buying an investment property in December, in which case we would have used much/all of the Capital One Savings account for a down payment. That seems unlikely now so we’ll probably move it into a brokerage fund soon. The $28,000 with Discover is earmarked for a home renovation to be done in the next few months**

LIABILITIES: None (no debt other than mortgage).

 Thank you in advance for reading all of this and for any/all insights! 

[cchrissyy]

With $1.6m in the bank and your strong salary,  he should quit YESTERDAY and decompress from his draining job.
You can retire too, or stay working a while and easily live on your pay and benefits while your investments compound, if that makes you guys feel more secure. But with your numbers there is no need for either of you to keep working another day unless you enjoy it.

[PizzaSteve]

With $1.6m in the bank and your strong salary,  he should quit YESTERDAY and decompress from his draining job.
You can retire too, or stay working a while and easily live on your pay and benefits while your investments compound, if that makes you guys feel more secure. But with your numbers there is no need for either of you to keep working another day unless you enjoy it.

Agreed.  Retire if that is what you want.

[Axecleaver]

You're making $56k a year in passive income from a pension, inherited investments, and rental income. Your 1.6m in investments would throw off ~$64k a year in income using the 4% rule. That's $120k in income, before you even consider jobs. You're spending $66k a year, and would likely spend half that in a LCOL area.

You were likely FI 10 years ago. Working at this point isn't for the money, it's because it's fun for you.

Your story shows how easy it is to keep doing what you've always done. Congrats on taking the first step to look around at your situation and decide what else you could be using your time to do. Enjoy your new, retired life together!

[SKL-HOU]

The income from the property owned by brother seems too low compared to the cash tied up.

You seem to have plenty of money to retire, the only thing is you are not optimizing the returns. Also, do you expect the therapy to continue indefinitely into retirement?

[ltt]

The only thing I would note is to reduce the eating out category and the miscellaneous spending category.  This would give you another $6,000 plus a year.  If you want to move to Minneapolis or Chicago, you can probably find a home/condo that is less expensive or around the price of what you have now.  And, I would be putting the Capital and Chase money into investments that would provide growth and income and quit my job yesterday. :)  You've done a fantastic job!!!

[Mr Mark]

Wow. Congratulations.  You have a monster stach!!

As above you are so FI it's not funny. There is also a lot of scope for even further optimization of the RE assets with the huge equity capital you have.

Check out the creative scene in Detroit.  Lower COL and lots of fellow Brooklynites to reminisce with. ;-) and with no kids the dire state of the public education system won't be a problem.

[erutio]

DO IT!!  You are way past FI.  I understand how those new to the RE concept may think it's too good to be true, but yes, you two can retire yesterday. 
Your 56k per year passive income is equivalent to another 1.4 million dollars added to your stache.  Would you feel more comfortable if you imagined your total assets as >3Million instead.  Because that's where it's at. 

If you aren't totally ready to make the leap, may I suggest:
1)  Your husband's job is killing him, have him give his 2 weeks on Monday. 
2)  Due to the understandable concern about the ACA, you could continue working and have both of you covered under your employee benefits
3)  In the meantime, live off of the 56k/year passive income.  Continue maxing your 401k and both IRAs (your husband can max one as long as you're working)
4)  Really track your expenses for the next year or so.  See how your husband is enjoying retirement.  Figure out how your lifestyles will change.  research moving to the midwest.
5)  Once you figure out how your expenses will change with retirement, how you two will live in retirement, how it feels to just live off your passive income, what will happen with the ACA, if you need as much therapy if you're not working, then retire in 1-2 years.

But seriously, that's an impressive stach, you two can retire now.

[JustGettingStarted1980]

Agree with everyone above. You are disgustingly ready for FIRE. Now comes the "extract yourself from the steady paycheck" phase.  I'd set a goal on just living off the passive 40K + 12K income (as your floor), sell the Brooklyn apartment, and slow travel until you find the next place you want to settle down long term.

Also agree with SKL-HOU that 4K return on 50% of a 328K investment property is rather low. Assuming you could sell it for 300K after expenses, your return is 4/150, or 2.7%/year. Either sell it to the brother or sell it entirely.

Congrats, your suspicions are confirmed, you two are in an enviably excellent financial position for the rest of your lives.

JGS

[Davids]

If you are FI then that should mean you can RE anytime you want, the time to RE is your choice but you have to be FI first.

[waltworks]

You were done a long time ago. Total insanity that you're still working if your husband is "especially burned out".

-W

[Sticker]

Wow, thanks for all the positive feedback!

erutio: it does seem too good to be true. Its funny, I know the numbers work ( and if it were someone else I would be with you all encouraging them to RE) but somehow its harder to see your own situation as clearly. Not to mention it's easy to let your perspective get skewed ( especially in a city like NYC) and start believing you need more and more (and more).

Davids:  common sensical that if you're FI you can RE but I never thought of it that way!

Mr Mark: I would not say no to Detroit! I have a soft spot for the upper Midwest.

That said, we do want to travel a fair amount in retirement, and want to be sure we have plenty of money on hand for that, and most of the time my job feel like easy money, so I guess I'm not in an hurry to retire but really love the idea that work feels optional right now. Its empowering.

My next post should be about asset allocation. We're mostly in Vanguard stock funds but have read/heard that one should transition more to bonds as they prepare for retirement...

Anyway, thanks all for the encouragement!

[Villanelle]

If you truly can't bring yourself to fully FIRE now, at the very least, your husband should quit his job and look for another one, even if it is part time or much lower paying (or both).  Perhaps he could find something that could even help with your travel plans (working for an airline in a non-traveling position, for example).