Don't worry.
For those retrenched ex-PMETs out there, such as ex-engineers and ex-bankers, do not be sad. Instead of worrying so much, you can just retire assuming you no longer have any dependents at age 55.
Good retirement plan in KL or Penang for a 55 years old retired couple.
Passive income
Rent out fully paid
HDB flat S$2.5k pm or RM7.5k pm
KL or Penang cost of living
Rent a 2 bedroom condominium RM1.5k pm
Car expenses RM500 pm (assume buy used car in cash RM30k)
Food, groceries and utilities RM1.5k pm
Misc RM1k pm
Total spending RM4.5k pm
Savings RM3k pm
This retirement plan allows you to live in a condo and drive a car.
Your key retirement asset:
HDB flat (we are very fortunate since we all get to buy cheap BTO
HDB flats when we got married)
Quote:
Originally Posted by Unregistered
For retirement sustenance, you could choose to drawdown from your savings or to depend on passive income generated from your investments or a combination of both.
The drawdown model is one where you will probably leave nothing behind for your loved ones much like annuity plans. Basically in the drawdown model, you will start with a certain amount saved up over the years and when you retire, you start drawing down from this saving. For eg, a couple estimated they would spend $60k pa in their retirement. To sustain 30 years in retirement, they would thus need a savings of $1.8m. This should not include the value of their home as they would need a place to stay, and they should cater some buffer for inflation.
On the other hand, if the same couple wants to depend on the passive income model, they would need sufficient investment to generate the $60k pa to cover their expenses. Their investment return should grow each year to keep pace with inflation. Using simple maths, if they can achieve a return on investment of 5% pa, they would minimally need to invest $1.2m. But investment come with risks. The higher the returns, the higher the risks. In bad economic cycles, they could see their investment get decimated. And should this happen, they will be forced back into the workforce at an advanced age. Not a pretty outcome.
In the passive income model, when it works, the couple could pass on the passive income to the next generation after enjoying years of payout throughout their retirement years. So to make the passive income model more robust, this is what we do:
We diversify our investments into three groups:
1. Stocks and shares - $1.2m giving us $50k - $55k pa (the shares holding are diversified to include higher yielding but riskier stocks, and lower yielding blue chips). Appreciation of the share prices are not considered because the prices could also head south.
2. Property - $1.1m giving us $42k pa. Again capital appreciation not considered as prices could also come down
3. FDs, bonds and CPF - $1.8m giving us $45k pa.
4. CPF annuity life - (applicable only from age 65) giving us $36k pa
The above does not include our home.
We hope that this investment model/spread will provide us sustainable income to last our retirement and at the same time we can bequeath it to our children! |