These are the few possibilities for the average Joe (without inheritance):
1. Retire young, die old and see your funds run out way before you go
2. Retire young, die young, leaving some money for your young family to struggle on
3. Retire old, die not long after retirement, leave a bundle for your family
4. Retire old, die old and still can leave remaining funds to your family.
Which one is attractive to you?
I have shared before, when investing for passive income, your investment account size matters. When your account size is small, and you are desperate for certain returns, you tend to go for higer risks investment. This exposes you to dubious products and scams, as well as other volatile investment.
So how to build up your investment capital? It is through using your human capital (work) to earn and save save. The longer you work, the more you earn. With frugal lifestyle, you can save to build up that investment capital.
At 4% returns on investment, to get
Passive income____Investment capital (not including your home)
$100k pa.________$2.5M
$120k pa. _______ $3.0M
If at 47, you retire with $3M networth, after taking away the home value, say $800k, you are left with $2.2M. Further remove the amount in your
CPF ( say another $500K), what is left?
With $1.7M, at 4% ROI, you will get $68K pa. There is very little upside to passive income, mainly downside. When the companies are not doing well, they will cut dividend immediately.
To counter this and to maintain some sense of stability in your passive income, a huge investment capital helps. Such that when a few sources are down, the healthier sources can make up for it.
Thats why we have more than 3 sources of passive incomes, and we only need incomes from any 2 sources to sustain our lifestyle. Two to provide safety margins.
The possible sources of passive incomes:
1. Stocks & shares
2. Bonds
3. Rental
4. Annuities
5.
CPF interests
6.
CPF Life (from 65yo)