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How much are you earning per annum?

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  #10211 (permalink)  
Old 27-06-2016, 11:25 AM
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Just need some advice for a family having the following:

a. Husband (early 50s) and Wife (late 40s)
b. Household income ($400k)
c. 5 Private Properties (3 pay up and staying in one and 2 properties with housing loan of $1m) Rented properties have received passive income after deducting all expenses). All properties have capital appreciation of at least 60%).
d. Nett Asset Value (i.e. less liability) is about $7 million.
e. 2 Kids of mid teenagers.
f. Family insured with $2.8 mil.
g. Other investment ($1 mil)
h. Combined CPF: $550k
i. Cash: 500k
j. Husband is guaranteed a job for the next 17 years and in senior management now (not so stressful) and Wife is in permanent post but job more stressful.
k. No other liability as a 1.5year old car paid up in the first year.

They are working as they would like to pay off their remaining loan and seek for more passive income. Kids need less of our attention now as they have their own friends now.

When will be a good time for the husband and wife to retire?

1.
Come find me at D** Treasures @ Siglap. I will have a discussion on how best you can feed me commissions while I whitter down your assets.

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  #10212 (permalink)  
Old 27-06-2016, 12:12 PM
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Had a lunch gathering with my kakis this afternoon at one of the many malls in Singapore. All of us are in our 50s (from 52 to 59) and still working. Some still have children in JCs while three have children who are already in the workforce.

The youngest in the group was 52 and he asked whether we had considered retirement since we were able to withdraw our CPF monies (OA & SA). Yes, we told him, but at our age, with our big loans paid off and children either finishing uni studies or already working, we find that life is getting less stressful, even at work. This coupled with the fact that we are seeing our savings rate accelerating make it less compelling to retire!

One in the group did a quick calculation to show what the 52 yo would forgo if he were to retire at 55:

Retire at 55
Last drawn annual salary - $200k
Annual savings - $80k

At 60 (5 years down the road)
Annual income forgone - $1m
Annual savings forgone - $400k

On top of this, besides forgoing the income, he would be digging into his savings from 55!

The gap just widens if he were to retire at 55 compared to us who are above 55 and still working.

He said he was trying very hard to bring his family expenses down to $7k pm from current $10k pm. At $7k pm, it will be $84k pa.

If he were to stop work at 55, he will need to sustain his $7k pm ($84k pa) lifestyle for 10 years till he can start receiving his CPF Life payout at 65. That 10 years (from 55 to 65) will require $84k x 10 = $840k! (Without factoring in inflation). So instead of building up his savings by $800k in 10 years if he continue working for 10 years, he would be drawing down his savings by $840k!

Upon hearing this, he said he is determined to work till 60.

We told him this was the way to go if we don't want to burden our children financially in our old age. Besides, with sufficient savings and an income we can continue to live in dignity as we aged.
It's therefore important to build up passive income. Ideally, passive income should cover expenses with leftover for re-investment to take care of inflation. Capital can then be preserved. Ironically, this would mean even greater savings foregone, since he would be able to save his entire income from working. The question, then, is how much is enough, and how much satisfaction is derived from working vis-à-vis other activities that could be enjoyed if one is not working.

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  #10213 (permalink)  
Old 27-06-2016, 12:20 PM
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The irony of working towards retirement: the higher the person's salary, the faster the wealth accumulation process, and the earlier one can retire. But the opportunity cost of retiring is also higher, and it becomes so much harder to retire.

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  #10214 (permalink)  
Old 27-06-2016, 12:34 PM
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The irony of working towards retirement: the higher the person's salary, the faster the wealth accumulation process, and the earlier one can retire. But the opportunity cost of retiring is also higher, and it becomes so much harder to retire.
The lust for wealth will never satisfy a greedy, lustful man.
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  #10215 (permalink)  
Old 27-06-2016, 02:02 PM
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The irony of working towards retirement: the higher the person's salary, the faster the wealth accumulation process, and the earlier one can retire. But the opportunity cost of retiring is also higher, and it becomes so much harder to retire.
Ha ha, very true. If a high income earner is not aware, he might end up working full time for all his life whereas the slightly lower income earner is happily retired and enjoys more. Such is the paradox of life. Giving up a high monthly income is psychologically very hard to do but ironically it is often the correct thing to do from the high income earner point of view. Of course, the kids hope that the father will work as long as possible because after all they are the ones who inherit the money later. Thank you daddy!
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  #10216 (permalink)  
Old 27-06-2016, 02:27 PM
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Ha ha, very true. If a high income earner is not aware, he might end up working full time for all his life whereas the slightly lower income earner is happily retired and enjoys more. Such is the paradox of life. Giving up a high monthly income is psychologically very hard to do but ironically it is often the correct thing to do from the high income earner point of view. Of course, the kids hope that the father will work as long as possible because after all they are the ones who inherit the money later. Thank you daddy!
There are people who died before retiring. So much wealth but no time to enjoy their wealth.
Wife and kids so happy to inherit lots of wealth. The kids can then retire early with the millions in their bank account. LOL.
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  #10217 (permalink)  
Old 27-06-2016, 02:57 PM
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There are people who died before retiring. So much wealth but no time to enjoy their wealth.
Wife and kids so happy to inherit lots of wealth. The kids can then retire early with the millions in their bank account. LOL.
Well, I won't say they are happy lah cos it is a huge loss but fact is ultimately the kids are the ones who get to enjoy. The wife not so much cos will be old too.
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  #10218 (permalink)  
Old 27-06-2016, 05:57 PM
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Its all relative. High income to one person may be low to another.

For eg, do you consider $200k pa high for you?

As a 30 yo, I will think $200k pa is high. But at 55, I will think it is only so so. Then again, if I was already earning $200k in my 30s I would think $200k at 55 is TOO low.

Then when you move around high income earners, you will find that $200k pa is just average.

So I think it is better to base on your expected lifestyle in retirement. From there you can gauge how much you will need in retirement. I think if you intend to have a car, a maid, stay in a condo, enjoy live concerts/plays, and annual oversesa holidays then better set aside $10k pm for expenses. Or $120k pa.

Straight away, you can work out how much you will need over the years:

In 5 years, you would have spent $600K
In 10 years, you would spend $1.2m
In 15 years, that would be $1.8m
and so on.

I suppose it is with this knowledge that many senior management people are holding on to their jobs for as long as possible. Many are used to living well while they are working, and would want to continue with that kind of lifestyle - maybe minus the business class for their holiday travel.


Quote:
Originally Posted by Unregistered View Post
Ha ha, very true. If a high income earner is not aware, he might end up working full time for all his life whereas the slightly lower income earner is happily retired and enjoys more. Such is the paradox of life. Giving up a high monthly income is psychologically very hard to do but ironically it is often the correct thing to do from the high income earner point of view. Of course, the kids hope that the father will work as long as possible because after all they are the ones who inherit the money later. Thank you daddy!
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  #10219 (permalink)  
Old 27-06-2016, 10:27 PM
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I suppose it is with this knowledge that many senior management people are holding on to their jobs for as long as possible. Many are used to living well while they are working, and would want to continue with that kind of lifestyle - maybe minus the business class for their holiday travel.
What's the point of working so hard if they have to slum it out in coach with the serfs?


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  #10220 (permalink)  
Old 27-06-2016, 10:44 PM
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Many people here talks about retirement. How much do you really need for retirement? It all depends on your retirement lifestyle. So, what's the typical average Singaporean retired couple's profile and how much do they need? Let's explore.

A typical, average heartlander retired Singaporean couple would be staying in a 4 room HDB flat which they bought cheap, direct from HDB many years ago and would be paid off fully by the time they retire (no more mortgage). They would most likely not own a car (a car is a luxury and not a necessity, especially for a retired couple) and do not employ a maid. They would do their own housework, which is not much for just two persons. They also cook their own meals or buy food from hawker centres.

How much are their expenses (TWO PERSONS ONLY)?

Groceries, hawker food, utilities - $1000 pm
Public transport (discount with PG card) - $100 pm
Medical - $200 pm
Medical insurance premium - $400 pm
Entertainment - $100 pm
Holiday travel (pro rated) - $200 pm
Total - $2000 pm

So, if they can earn a passive income of $2500 pm or $30,000 pa, they can retire before 65. If they don't have this passive income, they will have to retire at 65.

At 65, if they choose the Enhanced CPF Life, they will get $3,600 pm or $43,200 pa.
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