How much is enough for retirement in Singapore?
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MrsKiasu:
I think if half ur money is in property while the other half is in liquid investments, should be ok.. And of course decent amounts from insurance, savings plans should mature by then and liquid cash.. Monthly income can be from dividend, CPF etc.. I do not include rent as monthly income cos what if no tenants right?Oh gosh...how come today I think something is not very right at my side...we should be able to be debt free by 50years old based on our current commitment.. but but planning to buy another one wor..so we calculated... say by 65yo, hopefully debt free...then where is the 'lump sum' cash to retire? Only can get 'monthly' income and what happen if no tenants?...can still be a taxi driver if no more corporate job but what happen if health is no good?? Then want to liquidate by selling one property, what happen if at that time economy is so jialat that we can't find any buyer? Wouldn't that make us asset rich and cash poor same as the current problem that our past generation is facing now, holding on to the HDB or landed property but has lesser cash on hand :nailbite:
So now, is hugging the cash better than buying another property?
For us, we definitely dun hug a lot of cash.. Nope..
Some calculations,
When I'm 40, my Sonny will be 17, Lizzie will be 8..
When hubby is 55, Sonny would be almost 30, Lizzie would be 20+ hopefully a grad by then..
It is the right time to retire leh.. -
MrsKiasu:
1) how can you speed up to get your family debt free?Oh gosh...how come today I think something is not very right at my side...we should be able to be debt free by 50years old based on our current commitment.. but but planning to buy another one wor..so we calculated... say by 65yo, hopefully debt free...then where is the 'lump sum' cash to retire? Only can get 'monthly' income and what happen if no tenants?...can still be a taxi driver if no more corporate job but what happen if health is no good?? Then want to liquidate by selling one property, what happen if at that time economy is so jialat that we can't find any buyer? Wouldn't that make us asset rich and cash poor same as the current problem that our past generation is facing now, holding on to the HDB or landed property but has lesser cash on hand :nailbite:
So now, is hugging the cash better than buying another property?
2) you have 15 years to find a viable second career that you work on your own terms. be it consultant, part time corporate work, uber driver. you have 15 years to do that
3) your question should be: what is the ideal retirement allocation suitable for the last 30 years of your life
4) cut your rental by 50% from the market going rate. you should be able to get tenant. its not that big of an issue if the principal is paid off. you still get at least some cash flow
5) alternatively, diversified to a portfolio of reits, bonds, equity that generates cash flow
putting all the worse cases and not tackling them individually is going to create more uncertainty in life. -
Ideally no lifestyle change or adjustment upon retirement, and passive income equal pre retirement
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pirated:
Ideally no lifestyle change or adjustment upon retirement, and passive income equal pre retirement
Agree with u.. working towards it.. -
kyith:
Thanks for the analysis..
1) how can you speed up to get your family debt free?MrsKiasu:
Oh gosh...how come today I think something is not very right at my side...we should be able to be debt free by 50years old based on our current commitment.. but but planning to buy another one wor..so we calculated... say by 65yo, hopefully debt free...then where is the 'lump sum' cash to retire? Only can get 'monthly' income and what happen if no tenants?...can still be a taxi driver if no more corporate job but what happen if health is no good?? Then want to liquidate by selling one property, what happen if at that time economy is so jialat that we can't find any buyer? Wouldn't that make us asset rich and cash poor same as the current problem that our past generation is facing now, holding on to the HDB or landed property but has lesser cash on hand :nailbite:
So now, is hugging the cash better than buying another property?
2) you have 15 years to find a viable second career that you work on your own terms. be it consultant, part time corporate work, uber driver. you have 15 years to do that
3) your question should be: what is the ideal retirement allocation suitable for the last 30 years of your life
4) cut your rental by 50% from the market going rate. you should be able to get tenant. its not that big of an issue if the principal is paid off. you still get at least some cash flow
5) alternatively, diversified to a portfolio of reits, bonds, equity that generates cash flow
putting all the worse cases and not tackling them individually is going to create more uncertainty in life.
For us, to achieve the debt free status at a faster rate, I guess we got to .. 1) managing own property portfolio eg go for smaller/cheaper addition 2) hubby to work for higher salary and/or 3) I do my part in earning some income.
On how much is enough for the next 30 years after retirement, ok..just throw a figure for discussion purposes..let's say a $7k/mth of passive income fetched today for retirement income starting 20 years from now. Will that be enough for a couple? Just a very normal average lifestyle and assuming debt free by then. Also, kids should have completed their studies and can be independent. -
Hi Mrs Kiasu,
Your question is will it be enough for a couple. I firmly believe only 10% of the people will be able to generate a passive income of $7k a month.
Reasons:
1) majority don't build wealth well
2) there are not many things that is passive and requires little cognitive abilities other than a portfolio of low cost ETF or whole life policy that distributes. most of the other methods including property requires some management.
3) to generate $7k/mth or $84k/yr at 4% would require $2.1 mil (84000/0.04). It might be easy for high earners but for stuggling middle income it will be a challenge. hence not many would
with that out of the way, I wrote an article about http://www.investmentmoats.com/wealth-building-2/how-much-do-you-need-for-financial-independence-or-retirement-a-simple-formula-to-guide-you/
it deconstruct to the formula to come up with how much you roughly need.
if it is too long, here is the short version:
Let us call the fund you need to accumulate for Financial Independence (FI) be Wealth Fund.
The size needed depends on:
1) Your expenses in FI
2) Your Wealth Machine’s Rate of Return
3) Inflation rate in FI
In short it depends on the following 2 equations:
1) Wealth Fund required in FI = (Next year’s Expenses in FI per month x 12)/Rate of Return to generate cash flows in FI
2) Rate of Return of your Wealth Machine(s) required in FI = Rate of Return to generate cash flows in FI+ Rate of Return to keep up with Inflation in FI
For (1) suppose your expenses if you retire next year is $2000/mth, so annually it is $24000. If there is no inflation in this world, and your wealth machine can generate conservatively 5%/yr, then what you need is 24000/0.05 = $480,000
for (2), if there is inflation, you need to keep up with it, so if long term inflation is projected to be 2%, then you will need 5% + 2% = 7%. Basically your wealth machine needs to grow at 7% and what you need is $480,000. The math how this progress is in the article.
If you are not retiring this year but 15 years later, you can compute when the future value of the expenses, which will determine how much you need.
so if you are retiring in 15 years, and inflation is projected to grow at 2% then the future value is (1+0.02)^15 x $24000 = $32,300
Let me know how i can help. -
TheAnswer:
You are very lucky that when your son is almost 30, your hubby is just 55, can have 4 generations under one roof
Not intending to get more property?Always thought that u r still looking for more property.. We are thinking to get one more then I think enough liao.. passive income is currently sufficient.. Like u, I am also concerned about mental and physical well being.. losing these 2 aspects is scary..lee_yl:
Financially, I think DH and I are in good shape. Free of debts and probably some passive income from rental and dividends.
A neglected area is the mental and physical well being during retirement.
I am more worried that when I lose my mental faculty and physical ability and need to be taken care by a care-giver. One of my persistent fear is to be abused by the care giver. So I have been telling my kids, pls believe your poor mum should I tell tyou that my primary care-giver has been abusing me. Even with CCTVs, there are still blind spots.
Hubby and I still want to chiong for a few more years then hopefully by the time I m 40 .. I can semi retire :xedfingers:
Hubby I think at most work until 55 only..I dun think hubby wants to work beyond that...
Time to consider getting a landed property, so that all can stay under one roof
I am always on the lookout to acquire additional properties but at current prices and rental rates, investment property is just not attractive enough. Anyway, for hubby, he is likely to work until 62 or 67 even though he is likely to receive his full pension by 55, which we may go for one lump sum instead of monthly pension payouts. Better to have him occupied otherwise, Parkisons will set in early. Plus better for him out of the house so that we can have some personal space to ourselves. -
lee_yl:
what you mentioned very true...I worry for the time when hubby retires...from being busy to being too free at home. then he will meddle in everything and I lose my personal space...arguments will be frequent.
Anyway, for hubby, he is likely to work until 62 or 67 even though he is likely to receive his full pension by 55, which we may go for one lump sum instead of monthly pension payouts. Better to have him occupied otherwise, Parkisons will set in early. Plus better for him out of the house so that we can have some personal space to ourselves. -
kyith:
Thanks for the info, Kyith..wow, you write articles..Hi Mrs Kiasu,
Your question is will it be enough for a couple. I firmly believe only 10% of the people will be able to generate a passive income of $7k a month.
Reasons:
1) majority don't build wealth well
2) there are not many things that is passive and requires little cognitive abilities other than a portfolio of low cost ETF or whole life policy that distributes. most of the other methods including property requires some management.
3) to generate $7k/mth or $84k/yr at 4% would require $2.1 mil (84000/0.04). It might be easy for high earners but for stuggling middle income it will be a challenge. hence not many would
with that out of the way, I wrote an article about http://www.investmentmoats.com/wealth-building-2/how-much-do-you-need-for-financial-independence-or-retirement-a-simple-formula-to-guide-you/
it deconstruct to the formula to come up with how much you roughly need.
if it is too long, here is the short version:
Let us call the fund you need to accumulate for Financial Independence (FI) be Wealth Fund.
The size needed depends on:
1) Your expenses in FI
2) Your Wealth Machine’s Rate of Return
3) Inflation rate in FI
In short it depends on the following 2 equations:
1) Wealth Fund required in FI = (Next year’s Expenses in FI per month x 12)/Rate of Return to generate cash flows in FI
2) Rate of Return of your Wealth Machine(s) required in FI = Rate of Return to generate cash flows in FI+ Rate of Return to keep up with Inflation in FI
For (1) suppose your expenses if you retire next year is $2000/mth, so annually it is $24000. If there is no inflation in this world, and your wealth machine can generate conservatively 5%/yr, then what you need is 24000/0.05 = $480,000
for (2), if there is inflation, you need to keep up with it, so if long term inflation is projected to be 2%, then you will need 5% + 2% = 7%. Basically your wealth machine needs to grow at 7% and what you need is $480,000. The math how this progress is in the article.
If you are not retiring this year but 15 years later, you can compute when the future value of the expenses, which will determine how much you need.
so if you are retiring in 15 years, and inflation is projected to grow at 2% then the future value is (1+0.02)^15 x $24000 = $32,300
Let me know how i can help.
I m somehow always find excuses not to look into so many figures..so, I kinda like to use a 'rough' and hopefully reasonable figures to estimate the income, savings etc..but with all the inflation rates, present values etc, I somehow find myself 'blur' or have no confidence if those rough figures in my head are alright or not so now, we can continue to work harder with that as a goal..
So lucky to have many helpful ksp members here to provide advices :lovesite: -
3 Assumptions About Retirement Singaporeans Will Regret Making:
1) My kids will look after me
2) I only need to rely on my CPF
3) I don’t need so much money when I retire
http://blog.moneysmart.sg/saving/3-assu ... et-making/