Help with expense projections

[Random]

Good day, Mustachians.  I am financially at the FIRE threshold, confident that with prudent spending we could make it all work.  My wife is on the sceptical side (what if x happens?  What if y doesn't?) which is great so i am working through the math, running scenarios on various retirement calculators, looking at what current spending looks like, getting real data on social security benefits for us, and so forth.  So far so good.  I think I can do a decent job projecting basic living expenses, budget for travel, future education for the kid, etc.

So my question is, what are the things that change when you shift from wage earner to drawing from investment that I need to be aware of and include in my projections?  Obviously, health insurance needs to shift from employer provided to self provided, and the MMM posts on ACA and related have been helpful.

How about taxes?  How does that change when income comes from investments vs wage?

What are the other things that are in my blind spot that I need to add to the calculus?

Thanks,
Random

[nawhite]

One thing I've noticed that some people forget is travel. After you FIRE, there is a good chance that you'll travel more (visiting family, international travel, seeing national parks, everyone is different). While there is lots of support and information here on how to decrease spending at home/work/commute, while travel and vacations only get a passing mention. If you travel more and don't have the skills/experience to do it cheaply, you can spend more than you planned very quickly. So track you vacation expenses very carefully and understand that those likely more expensive weeks may happen more often.

I'm not saying that it is impossible to travel cheaply, I'm just saying that most of us don't get as much practice at it until after we FIRE and thus you need to be aware of it when calculating yearly withdrawl rates.

[matchewed]

Taxes are all based on your particular style of FIRE. You'll probably have a mix of tax deferred (401k's and similar vehicles), tax exempt (Roth), income stream (rental/business income), and taxable (standard after tax investment account).

You'll want to approach these by figuring out your most tax advantageous mix of them all. You'll need to be more attentive to your taxes and how you pay them. If you're a standard employee you've mostly just paid your taxes without much in the way of oversight. That can no longer be the case.

Now is the time when you get really granular with your investments and income streams and start outlining plans on how you draw them down.

[Frankies Girl]

I'm sure you've already thought of these, but I thought I'd throw them out there:

Health care/long term care/prescriptions

Dental checkups (and savings for things like crowns - depends on how good your teeth are, but those darn crowns can be expensive!)

Property taxes and house insurance (or renter's if you won't own)

Dues or fees for any organizations you belong to (or things like HOA fees)

Car maintenance and repairs
Don't forget to check with your car insurance to see if going from daily commute to occasional usage will drop your rate - it should.

If you're staying home more, your utilities will probably see an increase. Check with your electric company to find out if they have "peak hour" usage and try to avoid running the big energy suckers during that time, but the costs shouldn't be THAT much more all things considered...

[Random]

Thanks you guys.  All great suggestions.  I do think we need to think hard about travel expenses and how they will change.  In the near term (well, for the next dozen years), travel will be constrained to a school schedule.  Once untethered then we may travel a lot more.  It also looks like I need to do deeper thinking about the tax implications of several types of revenue streams as noted by matchewed.

Random

[marty998]

I'm sure you've already thought of these, but I thought I'd throw them out there:

Health care/long term care/prescriptions

Dental checkups (and savings for things like crowns - depends on how good your teeth are, but those darn crowns can be expensive!)

Property taxes and house insurance (or renter's if you won't own)

Dues or fees for any organizations you belong to (or things like HOA fees)

Car maintenance and repairs
Don't forget to check with your car insurance to see if going from daily commute to occasional usage will drop your rate - it should.

Most of these would be exactly ythe same as if you were working so I don't believe you would have to "watch out" for them. I reckon you'll find you'll be substituting a lot of purchases. Instead of work clothes, you'll be paying for increased travel, instead of commute costs you'll have costs for hobbies.

So I don't think its a question of expenses coming out of left field, but your mix of expenditure will naturally change

[DoubleDown]

Congratulations on your imminent FIRE, and great question. This is a question I deal with as well.

One thing I'm trying to factor in, with some difficulty or uncertainty, are rare but inevitable large expenses down the road. I'm thinking of things like needing to buy a new (used) car at some point; large home repairs like re-roofing; and things I can't even envision yet, such as technologies that don't yet exist.

So, I factor in some average, monthly amount for home maintenance/repairs, car purchases, etc. I think we have to embrace at some level the uncertainty, though. I've built up what I feel is enough safety margin and flexibility to handle expenses down the road, inflation, travel, and so on. If it turns out I've underestimated because some huge expense hits for some reason, that might suck at some level, but I don't think it would make me regret retiring early. The alternative is you are forever drawn into the "one more year" syndrome forever, and we can never put certainty on our uncertain lives.

[Random]

Congratulations on your imminent FIRE, and great question. This is a question I deal with as well.

One thing I'm trying to factor in, with some difficulty or uncertainty, are rare but inevitable large expenses down the road. I'm thinking of things like needing to buy a new (used) car at some point; large home repairs like re-roofing; and things I can't even envision yet, such as technologies that don't yet exist.

So, I factor in some average, monthly amount for home maintenance/repairs, car purchases, etc. I think we have to embrace at some level the uncertainty, though. I've built up what I feel is enough safety margin and flexibility to handle expenses down the road, inflation, travel, and so on. If it turns out I've underestimated because some huge expense hits for some reason, that might suck at some level, but I don't think it would make me regret retiring early. The alternative is you are forever drawn into the "one more year" syndrome forever, and we can never put certainty on our uncertain lives.

Awesome comments, doubledown.  Your last point is the heart of the discussion I am having with my wife right now.  The core of it is this:  how much is future certainty worth compared to greater freedom today.  We could pull the trigger today if we spent under $50k annually (I.e., twice the MMM family!!!) or be wage slaves for another 3 years to ensure that we could spend $75k annually if we needed to.  I am 7 years older than my wife, which means the end zone of life is 7 years closer for me, so the freedom v certainty calculus is different for me than her.  My strategy at this point is to determine exactly what we need to get to her level of certainty, show her that all of the retirement calculators predict 100% success, get us both commit to the plan to get there in short order.  (in part this works because we are both reasonably well compensated doing work that we feel has value to us and the world, so status quo is still a good thing).