How much is enough for retirement in Singapore?

[kyith]

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.

[lee_yl]

TheAnswer:

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.

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..

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...

You are very lucky that when your son is almost 30, your hubby is just 55, can have 4 generations under one roof
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.

[janet88]

lee_yl:

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.

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.

[MrsKiasu]

kyith:

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.

Thanks for the info, Kyith..wow, you write articles..

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:

[starlight1968sg]

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/

[zbear]

starlight1968sg:

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/

For item 3, we no need to sit in void deck, we can chit chat on KSP.

[starlight1968sg]

zbear:

starlight1968sg:

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/

For item 3, we no need to sit in void deck, we can chit chat on KSP.

To chit chat on KSP, must hv a device (smart phone or ipad) connected to an ISP :oops:

[TheAnswer]

Cannot spend the whole day chatting on KSP… need to have a more fulfilling life…

[lee_yl]

janet88:

lee_yl:

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.

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.

According to DH, previously, many cases of officers who died shortly after retirement, 2 plausible causes:

1) without the excitment, the body can't adapt so deteriorate and die fast,
2) lack of social and mental stimulation which leads to a declining health and early death.

[MyPillow]

lee_yl:

janet88:

[quote=\"lee_yl\"]
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.

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.

According to DH, previously, many cases of officers who died shortly after retirement, 2 plausible causes:

1) without the excitment, the body can't adapt so deteriorate and die fast,
2) lack of social and mental stimulation which leads to a declining health and early death.[/quote]such cases are really sad. suppose to retire n eat the fruit, end up ...
Moderate enjoyment n work to keep body going