Whats your net worth

In this hurried world, people easily get caught up in rushing from one thing / place to another. Likewise, in their personal finances, they want their wealth to grow quickly. They see their neighbors have cars, they go out and buy themselves one. They see their neighbors have a BMW, they upgrade theirs to a BMW too - if they cannot pay in full, they take loans.

Some things do need time to blossom. Take children for example. A child needs 21 years to become a full fledge adult and another 3 to 4 years to become economically productive. By the time they start to be financially independent of you, they could be in their late 20s or even 30s - running their own households. The other is wealth. Wealth also needs time to build up. The earlier you start saving and the longer you save, the bigger your wealth will grow.

I find that slow and steady savings do work. There is no need for complicated and risky investments. And one of the best and most secure way of building up your wealth is through the CPF. Consistent savings and Time are the magic ingredients.

Currently in our mid 50s, my wife and I have more than $1M each in our CPF accounts earning a yearly interest of $34k each. If we live frugally, we could just live off the CPF yearly interest. From 65, we expect to have another $48k combined payout from our CPF Life each year.

Any dividend and rental income we get along the way will be our bonus to spend for holidays overseas.

Originally Posted by Unregistered

How much is enough to retire?

There are many factors at play, of which the biggest is your age.

When we are young, < 50 yo, $1M is certainly not enough to consider retirement, when we are old >70 yo, $1M should be more than adequate for a single person.

Lets take the case of 2 couples both having a life expectancy of 85 years. One is a young couple at 40, and the other couple is 60 yo. Say both couples need an annual expense of $100k (for ease of calculation and comparison) in retirement. $100k pa is $8.3k pm.

For the young couple to retire at 47, they will have 38 years in retirement. With an annual expense of $100k, they will minimally need $3.8M. With inflation of 3% pa, they will need >$4M to support their retirement till 85 yo.

For the older couple, supposing they retire at 62. They will have 23 years in retirement. Of which they will $2.3M to support their $100k pa retirement lifestyle.

Here in lies the paradox. The earlier / younger you retire, the more you need to save for retirement but the less you tend to save / accumulate. The older you retire, the less you need in retirement, but the more you tend to save / accumulate.

My personal view is retiring at 60 is optimal. This will give you the opportunity to reap some of the benefits of the golden period of accelerated savings from the age of 50.

Our personal experience testifies to this. Before the age of 50, we were saving < $150k pa. From 50 yo onwards, we saw our savings climbing steadily year on year crossing $200k pa at 51 yo to $400k last at 56.

The last 6 years savings were critical to building up the bulk of our nest egg. If we work till 60, the contribution from the savings from 50 to 60 yo period would form 50% of our entire lifetime of savings!

This golden period of accelerated savings is not something to be missed!

There is another paradox to consider. The older you retire and the more you save, the less time you have to use the money. In fact, you may have accumulated so much that you end up spending just a fraction of what you have eventually. The younger you retire, the more time you have to enjoy retirement, but on less money.

Perhaps the way to solve the paradox is to invest. Regardless of the age you are now, if your passive income covers your expenses and more, and you reinvest the extra, you would not need to worry about money running out. Caveat - theoretically.

Originally Posted by Unregistered

There is another paradox to consider. The older you retire and the more you save, the less time you have to use the money. In fact, you may have accumulated so much that you end up spending just a fraction of what you have eventually. The younger you retire, the more time you have to enjoy retirement, but on less money.

Perhaps the way to solve the paradox is to invest. Regardless of the age you are now, if your passive income covers your expenses and more, and you reinvest the extra, you would not need to worry about money running out. Caveat - theoretically.

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)

Originally Posted by Unregistered

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)

anyone buys ES3 and IWDA on a regular Long term basis? How is this strategy?

Originally Posted by Unregistered

anyone buys ES3 and IWDA on a regular Long term basis? How is this strategy?

I have been doing dca into g3b, a35, iwda for three years. 2K per month investment. Annualised returns about 8% to 9% including dividends. Will continue doing this for the next 30 years.

Wife 40, 270K pa
I 43, not working since 2009
One 5 years old kid
2 cars (no loan)

Property 1: 2M (no loan, not rented)
Property 2: 2M (no loan, not rented)
Bonds: 1.5M
Stocks: 250K
Cash: 1.5M
Bond interest + Dividends: 80K pa

Near term plan is to buy another 1.5M of bonds and bump our passive income up to 140K pa. Medium term plan is to convert one of the properties to bonds. I am not looking to grow our wealth. Just need to protect our capital and aim for 200K pa passive income. It is up to my wife when she chooses to stop working.

Married couple early 50/early 40 with 2 kids in primary school.

Cash 490k
Combined CPF 695k
Stocks 268k
Insurance value 132k
Condo 800k (fully paid)
Car Loan 38K

Wife not working. Annual package 240k.
Annual savings excluding CPF contribution about 90- 100k

Plan to work till 67

[crossroads]

What's the yield on your bonds?

On your lifestyle how do you occupy your time? Been considering something similiar myself to stop working.

Originally Posted by Unregistered

Wife 40, 270K pa
I 43, not working since 2009
One 5 years old kid
2 cars (no loan)

Property 1: 2M (no loan, not rented)
Property 2: 2M (no loan, not rented)
Bonds: 1.5M
Stocks: 250K
Cash: 1.5M
Bond interest + Dividends: 80K pa

Near term plan is to buy another 1.5M of bonds and bump our passive income up to 140K pa. Medium term plan is to convert one of the properties to bonds. I am not looking to grow our wealth. Just need to protect our capital and aim for 200K pa passive income. It is up to my wife when she chooses to stop working.

[kaos]

Seen a lot of great replies and advice here. Specifically wondering if forum-ers here can provide some advice:

42 male, wife 39 female, 2 young kids
Both working professionals (finance) - combined $205k p/a after tax not including bonuses (maybe about $50k p/a after tax)
Cash - $200k
Car Loan - $1.2k per month
Stock/Equity - $50k
Own Home - $1.4M (loan $550k)
Investment Property 1 - $1.6M (loan $1.1M, $25k net rent p/a)
Investment Property 2 - $1.55M (loan $630k, $40k net rent p/a)
Watch Collection - $60k

Total Assets = $4.66M
Total Debt = $2.284M

Net Worth = $2.376M

As you can see my net worth is heavily property-weighted and pretty concerned that I should be diversifying more into stock , bonds and ETFs etc as a lot of people here have. Anyway interested to hear genuine advice/suggestions/comments. Thanks everyone in advance!

I would say

Your 1st investment property is really not performing, you should sell it off and pay off your own home. Then save up.

I would cut back on the watch purchase personally, when times are bad they literally have low value. Its an expensive hobby as well. I don't include watches as part of my networth because of this.

Also investing in stocks etf etc is not suitable for everyone, saying it is one thing but how well are you able to invest in this sector assuming you have cash. You should dabble abit to show if you suited before you consider moving your investment strategy. No issues with just property investment but one needs to pick the right props that give back a good yield and hopefully cap gains (en bloc etc)

Originally Posted by kaos

Seen a lot of great replies and advice here. Specifically wondering if forum-ers here can provide some advice:

42 male, wife 39 female, 2 young kids
Both working professionals (finance) - combined $205k p/a after tax not including bonuses (maybe about $50k p/a after tax)
Cash - $200k
Car Loan - $1.2k per month
Stock/Equity - $50k
Own Home - $1.4M (loan $550k)
Investment Property 1 - $1.6M (loan $1.1M, $25k net rent p/a)
Investment Property 2 - $1.55M (loan $630k, $40k net rent p/a)
Watch Collection - $60k

Total Assets = $4.66M
Total Debt = $2.284M

Net Worth = $2.376M

As you can see my net worth is heavily property-weighted and pretty concerned that I should be diversifying more into stock , bonds and ETFs etc as a lot of people here have. Anyway interested to hear genuine advice/suggestions/comments. Thanks everyone in advance!