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Reemployed with lower pay and worried about retirement.

Thursday, October 19, 2017

Reader says...
I have been a reader of your blog for many years now.

Similar to your childhood experience - my parents also went thru bankruptcy during my teens and bad memories of money lenders coming to the old house.

I am Malaysian and coming to 55 years old. I was made redundant middle of last year, was unemployed for 4 months and have since resumed working.

My current gross salary is just enough to cover my household expenses + medical insurance for the whole family. (wife+ 3 kids.)

My fear of becoming destitute in the old age has created self-stress, as I continue to have interrupted sleep & tension with family members as I continue to delay/disapprove of their wants.

I currently have > RM3.3Mil in Malaysia Bonds, EPF & fully paid-up endowment policies. I park SGD$0.57Mil in a Singapore bank and have 2 fully paid-up landed property (one for my parents and the other for my family worth a total of RM2.5Mil).

AK pls talk to yourself, How should this person 'live life' going forward?

AK says...
All of us need to plan for the day when we stop working either voluntarily or involuntarily.

Usually, it means saving some money first and then putting it to work.

Hopefully, by the time we stop working, we would be able to receive a regular and meaningful income to have a comfortable retirement.

If your gross salary is enough to only cover your expenses, it means that you do not have any money left to grow your savings. So, I can understand your worry.

However, I can see that you were prudent in your younger days. 

Having 2 fully paid homes, $0.6 million in savings and RM3.3 million in bonds, EPF and endowment, I feel that you could possibly have a comfortable enough retirement if you have a modest lifestyle.

Having said this, I agree that you should continue to be prudent when it comes to wants because your earned income does not have room for wants. 

To satisfy the wants, you would probably have to dig into your savings.

Assuming the old folks at home are financially independent, I would continue to work till my 3 children are financially independent.

If my parents depend on me financially, then, I would continue to work till they pass on and when all my children are financially independent.

Maybe, I could switch to part time work and have more leisure time when fewer people depend on me financially.

You could rent out one house when your parents pass on in future. 

The rental income plus the interest income from your bonds and EPF savings mean you would have a more meaningful passive income.

Money from your fully paid endowments and savings in the bank could be put to work when Mr. Market goes into a depression or whenever there is a good investment opportunity. I would think of these as your war chests.

If you are risk averse, you could think of purchasing a few annuities to fund your retirement. 

You might want to do this sooner than later so that you could start receiving another stream of passive income sooner.

At your age, your balance sheet is definitely not weak but with dependents, it could be exhausted quite quickly if you are not careful especially when you are not able to grow your savings meaningfully.

As long as you stay prudent when it comes to expenses, when you no longer have dependents, all else remaining equal, I believe that your retirement will still be a comfortable one.

Related posts:
1. Advice on saving.
2. Needs and wants.
3. To retire, have a plan.
4. Have an annuity?
5. Too late to plan at 57?


laurence said...

Many people worry for the sake of worrying even though they have more than enough wealth to last till the day they die. And then there's another group who worry about leaving a meaningful legacy for their grown-up married; as a result try to save every penny and neglect to enjoy their old age.

Most people just refuse to bother to do their maths; instead prefer to blindly go with the popular belief of "Money No Enough" made famous by local movie. For these people, they will never be satisfied with whatever amount they have.

Unknown said...

No offence but this guy just seems like a troll..

1 million SGD in bonds/paid-up endowment policies, another 500k in savings, 2 fully paid up landed properties and he is worried ?

I guess the rest of us earning less than 3k and supporting a family of 3 living in a HDB should be even more worried

AK71 said...

Hi Laurence and Janson,

Well, some people have said the same things about me. ;)

Some time ago, when I revealed that I still kept an emergency fund, a fellow blogger was incredulous, to put it diplomatically. He didn't believe me because of what I have in passive income.

I made a reference to it too in this blog:

I have always been a worrier and I still worry quite a bit.

We are very much products of our past experience. :)

AK71 said...

Lee Keh Yi:
erm... "I currently have > RM3.3Mil in Malaysia Bonds, EPF & fully paid-up endowment policies. I park SGD$0.57Mil in a Singapore bank and have 2 fully paid-up landed property"... and he's worried about being destitute?! or is this a stealthbrag?

Adele Wong:
Depending on how the 1mdb saga goes his epf and govt bonds may be a fraction of it's redemption worth!

Invest Sg:
He has wife + 3 kids + parents to take care

Joe Chua:
I am puzzle too....

Jasper Quek:
If he is still worried, then many on the streets who got axe after 40yrs old can die flat.

Lee Jiahui:

Shi Tan:
When we do not know how much we have and how much we need for retirement. We have to worry. For ppl does not investment, investment in stock become riskier than any investment . Ak does not think investment in stock market is a risk at all. Financial education is important.

Alan Teow:
My opinion is not how much money you have, is how you manage your money.

AK71 said...

Simeon Kong:
There are far more ppl with less and they are happy abt their life. We worry when we have money or not. That’s why its not money issue, it’s mentality. But stress is common nowadays. Be healthy and find ways to release stresses.

Unknown said...

Dear AK71, a bit strange that he ended by asking "AK pls talk to yourself, How should this person 'live life' going forward?". Sounds a bit mischievous to me at least, the part about talking to oneself.

Well, giving him the benefit of the doubt, I would perhaps ask him to spend a bit of his money to firstly, see a psychiatrist to treat his fears "of becoming destitute in the old age ,his interrupted sleep & tension with family members". I am not a qualified Doctor, but any layman can see these are concerns relating to signs of depression and anxieties.

Good luck!

AK71 said...

Hi MA,

I have some rather deeply rooted fears myself.

So, I understand where the reader is coming from.

A couple of months ago, I suggested to a reader to see a doctor too:
Jobless for almost a year and losing my mind.

We should not be afraid to seek medical help. :)

ValueHunter said...

Most important, old age - best is to keep healthy and reduce medical expenses and old folk home. How? Swim, jog, yoga, taichi. And learn chinese and indian herbal treatment.

Rather than trust doctors, build a strong defence system.

Eating - eat less, eat health food such as corn, sweet potato, ginger, garlic... Reduce intake of food by 30%. Basic good is excellent for health.

AK71 said...

Hi VH,

Health is wealth.

Sometimes, we need medical help.

It could be herbal too like you said.

So, we should see a doctor if we really need help.

csky said...

Like many others, I was initially incredulous to hear about his worries when he has over SGD$2M of assets. But on further thoughts, I think his fears may be more cash-flow related.

We do not know how old his kids are. If they near working age, things will likely ease up in the near future. But if they are all still young, then the anxiety over cash-flow would be understandable. If he is out of job now, his only means for cash-flow will be to draw down on his assets with no other means of increasing his assets.

I guess that's where the beauty of AK and STE's strategy to invest for income really shine.

Hopefully he can rent out one of his properties at a suitable time.

Otherwise, if he retires in Malaysia, with RM$4.8M liquid assets, estimating RM$60,000 draw-down per year for expenses, that's enough for 80 years of expenses. He might feel less anxious if he look at from this angle.

AK71 said...

Hi csky,

I believe you have cracked the puzzle! :)

There are so many people who are asset rich but cash poor who continue working for a salary because that is their only source of income.

If they choose not to monetize their assets one way or another they would probably have to continue working and it could be until the day they die.

AK71 said...

Although investing in properties for rental income can be a good idea, it is not a good idea to be over leveraged.

I know a couple of people who are experiencing financial difficulty now because their rental income is unable to cover the monthly mortgage payments.


csky said...

Haha AK, if only it was just as easy to crack my own puzzle to financial freedom like you.

I realize I have to read many of your posts a few times to "get it"! Looks like I have a long road ahead.

As for properties, I literally walked by the property goldmine during the 2009 period (no guts and did not spend time to study the market). Based on what I have read, there is currently a pretty high vacancy rate and no demand push factor (like the massive immigration influx during 2007-2008 period), so I also cannot figure out what's driving all the enbloc fever.

AK71 said...

Hi csky,

I am just a regular lazy fellow and chose what I feel is the path of least resistance. ;p

As for the fever that you mentioned, if I don't understand, I don't participate.

Money not made is not the same as money lost. ;)

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