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What is Financial Independence (FI)? According to Wikipedia, FI is defined as:

"State of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income that is greater than their expenses."

For the majority of us, without the benefit of inheritance, we will begin our financial journey through working, saving and investing. We all hoped that one day we will save enough or that our investments are able to provide sufficient passive income for us achieve FI. Unfortunately for the vast majority of people, they may never be able to achieve FI in their lifetime.

There are two sides to the equation for FI. The income side and the expense side. Many will try to cut their expenses to the bare bone in order to make it easier for the passive income to cover their reduced expense. This is dangerous when they are young as the expenses will grow as they age. The real and better solution is actually increase your passive income. And that means working longer if you have to.

My own journey to achieve FI is as follows:

From age 25-50: I was in pre-FI mode. During this period, I was building up the foundation to the sources for passive income. I invested in dividend paying stocks, and when I had sufficient savings, I invested in a second property. At 50, my passive income was around $55k pa., nowhere near my expense of $130k pa. I was just not working my savings hard enough.

From 50 to now: For the past 2 to 3 years, my passive income has grown to over $100k pa, (it was > $120k last year) still unable to cover my annual expense. I could be in FI mode if I cut back on my expenses but at 56, you would want to YOLO ! Indulge yourself once in a while.

What was clear to me was that all my passive income sources were no match for the most important income generation asset of all - myself!

That's the reason why I advocate that we should all work as long as we can. Once we stop work, we give up this important asset to make income!

Besides the financial aspects, once you stop working, you also give up the other non-tangible benefits of working.

Next I will share how much asset I needed to deploy to generate >$120k pa in passive income.

I will share my story of how I manage to semi-retire in my mid 40s and it has been a wonderful few years of semi retirement.

Prior to my semi retirement, I worked in the fast paced, high stress world of high finance. I did well, got big pay and big bonuses. Did not splurge on expensive luxury cars but instead invested my money in properties and stocks. I also upgraded to a big landed property when I was only in my 30s.

After the many tiring years, I decided to quit and take on a slower paced life. I semi retire and now work on projects I choose. I sold my landed property at a HUGE profit and moved to a 3 bedroom luxury condo unit in a good district. This condo will be my retirement home. My passive income from my investments allows me to semi retire. Any income from my projects are just extras that adds on to my fortune. My family is also well insured and taken care of.

Life is so much better now. I can spend more time taking care of my family (which honestly I quite neglected before). My teenage children loves me a lot more now as I spend time talking to them, coaching them with their studies and even going out to movies, shopping and eating at restaurants with them. I am proud to say that I am now a good father. A father who really cares and in return my children loves me a lot more. This is one thing many of my friends are envious about me as they are not good fathers as they are neglecting their children.

So, if you want to have an early retirement or semi retirement, it is important to work in a high paying job. Next, you must not throw your money away buying expensive depreciating assets but instead invest in properties and stocks. This is a good path towards financial freedom.

Next COE bidding

Both Cat A and Cat B will likely go above $50k.

Those who bought at COE $38k are very lucky. That will be the lowest point for the next few years. When COE supply shrink in the future, be ready to pay at least $100k.

Demand driven by: replacement demand, demand from private car operators, new drivers, richer families with high household disposable income, families buying their second and third cars, etc.

Supply will shrink in the future.

Demand rise, supply fall means COE price will rise.

Originally Posted by Unregistered

Next COE bidding

Both Cat A and Cat B will likely go above $50k.

Those who bought at COE $38k are very lucky. That will be the lowest point for the next few years. When COE supply shrink in the future, be ready to pay at least $100k.

Demand driven by: replacement demand, demand from private car operators, new drivers, richer families with high household disposable income, families buying their second and third cars, etc.

Supply will shrink in the future.

Demand rise, supply fall means COE price will rise.

Sigh. I guessed i missed the boat. When I saw it $38k, I thought that I can wait till below $30k. Now it looks like it is heading back towards $60k again. Got to wait for the next cycle down patiently.

Gosh, I missed this forum. Being away for a while. My view/perspective on how much to retire/spend: It's really up to you! Really. I stay in a 4-room HDB, no car, take MRT, wife not working, monthly pay $18k pm before bonus, wealth > 1.5m, monthly expenditure not sure, probably 4k, waiting to withdraw $500k from CPF in 3 years' time. Life should be easy.

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!

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)

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!

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!

Are you trying to subtly say that you have $4.1 m of asset to generate your passive income (excluding your home). Don't come and hao lian la.

Originally Posted by Unregistered

Are you trying to subtly say that you have $4.1 m of asset to generate your passive income (excluding your home). Don't come and hao lian la.

I call it crude subtlety. His writing style is one kind one. Same person over and over again.

Assuming your home value is $1.6m, your total networth is $5.7m

Your asset allocation to the various investment is

1. Stocks & shares: 21%
2. Investment property : 19%
3. FDs, bonds and CPF : 32%

Based on the passive income of $142k pa, you are achieving 2.5% returns on your

I guess this is about the right balance and overall good portfolio for middle age people.

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!