How to have enough for retirement and to do charity?

In many ways, this is a heartwarming email from a reader:

Hey AK,

I am going to retire at Age 27!!!!! 

Just kidding. I am 27 and if I retire now, I'm gonna hafta eat grass for half my life. :D:D

Nevertheless, I emailed to say how your recent blog posts on retirement and financial freedoms came at a time when I was just putting some of my "how to retire at 55" strategies to paper! 

Gave me quite a few ideas I could work on.

But first, I had some thoughts after reading your "Wake them up before they get financial nightmares" post. 

You shared how a reader saw how his friends were wasting money and tried to get his friends interested in investing. 

But they basically bo hiew him. And he felt very dejected about it. 

Actually, I want to say to him: 

There's no need to feel affected about how others are spending their money or feel dejected that you feel your friends are not exercising enough financial prudence. 

Everyone came from a different starting point and everyone is on their own journeys in life. 






For instance, my mum came from a poor family of 10, worked hard to see her siblings through school, sacrificed her own material comforts when young. 

Now that I have grown up and have earning power, I don't begrudge her anything, e.g. so she travels comfortably, I got her a car; supp cards etc. 

If someone had nothing growing up and when he wanted to blow his money on things he never had, during those young careful years, who are we to stop them or judge them you see? 

If someone wanted to zhng his house or car cos he derives great pleasure from it, who are we to say they are "wasting" money? 

I think the best way is to simply share rather than scare people into financial prudence. But that's just me thinking lah.

Okay, onwards to retirement strategies. 

I have a more realistic plan of easing off (semi-retiring) at age 55, so hopefully when 55 hits I will have multiple streams of monthly income. 

My target income streams are 

1. Sharebuilding, 
2. Dividend stocks, 
3. corporate bonds, 
4. Annuities.

I wanted to seek your advice (or thoughts if you are scared of the word advice, haha) on 2 matters:

Annuities - Is it too early to start at Age 27? I only want to start drawing at age 55. At my age now, would it be better to use the cash going to pay premiums to instead accumulate shares or buy corporate bonds? 

Or do you think it is more feasible to accumulate a basket of shares now and use their dividends at age 40 to pay off the premium for the annuity? 

Would you recommend annuities even?

Another way I thought of was using SRS money to buy annuities and draw down from 62...

Cash flow - each mth combined my husband and i will have 16.5k of cash savings (nett of everything) I don't do anything with it, just put into CIMB star saver. 

In your opinion, do you think given our age profile, we should be a tad more adventurous?

I know what you will say, haha. Hard to analyse cos nothing is said of my debt situation right? You are right, I am still paying off a HDB home loan. 

But suffice to say that after accounting for home loan, we will be 50k positive. 

Given this, would you have any advice for me on my above 2 queries?

Lastly, I have been inspired by your frequent calls to give back to society. 

I always read in the papers how the poor and elderly Singaporeans cannot benefit from Singapore's growth (inequalities widen in Singapore etc etc). 

Even though now they have lowered the lot size so that lesser well off can participate in the stock market, 

1) The commission fee is still geared to benefiting those who buy more than 1000 and 

2) I don't think the elderly destitute have any notion of the stock market. 

So I have decided I am going to do it for them. 

I will use 5k seed money of my own, perhaps with yearly top ups. 

And I will distribute the dividend money each time I see the truly poor e.g. buy them a hot meal when I see them foraging for scraps. 

If this "fund" grows, I will realise the profits as well and distribute them as and when needed. 

I know this is probably a drop in the ocean and very geographically limited, but this is as best as I thought of on how I can help the elderly poor participate in the growth of Singapore. Any better ways you reckon? 

Do you have any recommendations on what stock to buy for this "fund"?

Thanks and regards,

T

See: To be a happy peasant!

My reply:

Hi T,

First, a general impression. You are young and your income is definitely way above average. You have time on your side and the resources to plan for a very comfortable retirement by age 55. It is definitely good to have advantages. :)

OK, this is where I talk to myself.

Annuities. In Singapore, I believe that the best annuity money can buy is actually the CPF Life. 

4% risk free returns and a monthly pay-out for life? Sign me up! 

Max out our CPF-SA early if we have the resources to do so and we are set for a nice lump sum withdrawal at age 55 and a lifetime monthly pay-out from age 65. 

I like low hanging fruits.





Having time on my side in my 20s also means that I am able to ride the ups and downs in the stock market. 

So, after making sure that I have a sensible emergency fund and necessary insurance in place, I will put aside money to invest in equities for greater returns instead of having all my money in fixed deposits or bonds. 

After all, in the long run, equities outperform bonds.

Of course, if we have spare money to invest in the stock market, we are considered very fortunate. 

We should not forget the less fortunate amongst us. 





Is our effort just a drop in the ocean? I think every drop helps. :)

In the past, I would give a portion of my income to a list of charities that I support but starting this year I am putting such money away in a charity fund which I will not be taking much risk with. 

This is consistent with my idea that we should not risk money that has been earmarked for purposes other than for investment.

As I make money from my investments, crossing fingers, and as I make more public appearances, I will put more money into this fund. 

It will hopefully grow to a size that is big enough for me to do what I want to do with it in a few years from now. 

In the meantime, I will probably park money in the charity fund in fixed deposits or the Singapore Savings Bonds.





This email exchange took place quite some time back. Should have been published earlier. 

I only discovered that I overlooked this when I was clearing my mailbox. Terrible.

Bad AK! Bad AK!

Related posts:
1. Wake them up before they get financial nightmares.
2. Retiring before 60 is not a dream.