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Retirement adequacy for late bloomers 101.

Saturday, August 11, 2018

I have said many times before that we should start saving money and investing for income as soon as possible.

If time is on our side, the journey to financial freedom is likely to be less demanding.

This led me to say that everyone should start young.

The younger we start saving and investing for our retirement, the easier it is going to be.

Imagine a 25 year old investing S$650 a month.

Let us say his investments give a 5% dividend yield.

Let us say he re-invests the dividends.

How much would he have by age 65?

A cool $1,000,000!

The problem with this narrative is that older readers who have yet to start their journey or have recently started on their journey sometimes get discouraged or even depressed after reading this.

Of course, what I always tell them is that they are just starting later.

Not late but later.

It simply means that they have to work harder.

It is likely to be harder because most older readers have rather hefty financial commitments which include money guzzling pets known as "children".



Who threw a shoe (or two) at me? Who? Who?

All else being equal, having less mileage left in life, they are also unable to take hard knocks financially (although some of them think they can) but that is another topic and if you are interested, you would want to read my latest "e-book".

Survivability and opportunity in times of distress.

There is no point in regretting.

There is no point in feeling depressed.

Set a goal, a realistic goal and, then, it is just a matter of putting one foot in front of the other.

Remember, the journey to financial freedom is not a race.

Journey to financial freedom is not a race!

"What if I never become financially free?"

I have always been encouraging but, for some people starting later, it is a possible scenario despite their best efforts.

To these people, I will say that even if you do not become financially free, if you do the right things, you will become financially more secure!

Cutting out unnecessary expenses (by keeping needs simple and wants few) and having some passive income will make anyone financially more resilient.

It is quite simple.

However, I still believe that, in Singapore, unless we are severely disadvantaged, all of us can become financially free.

If you are a young person, you have time on your side.

Don't squander it.

If you are an older person and have yet to start on the journey, don't lose heart.

In my reply to someone in his late 50s who has just joined us on H.M.S. Financial Freedom, I said:

1. Recognise that I cannot be too adventurous with my money because I can ill afford massive or total loss of capital.

2. Max out CPF-RA to benefit from a risk free 4% to 6% per annum return and this will provide a guaranteed monthly income in future (earliest from age 65).

3. If I have money to spare, get some investment grade bonds which includes Singapore Savings Bonds.

4. If I still have money to spare, get some relatively stable investments in stocks (like ST Engineering) and REITs (with stronger balance sheets) for higher returns but this should be a smaller percentage of total portfolio.

5. Adjust my lifestyle according to how much I expect to have coming in at retirement instead of working towards something that will pay for my current lifestyle in retirement.

6. Even after adjustments, if there is a big mismatch between expected inflow and expected outflow, postpone retirement by a few years to strengthen personal balance sheet and cash flow.

7. If I have the option and if I really need the cash, rent out spare rooms at home, if any.

You can still be financially free even if you start very late in life.

Yes, bloom later but bloom, you shall.

If AK says so, it must be so!

Related post:
Improving retirement adequacy for my dad.


WTK said...

Hi AK,

Well said. People tend to focus too much on the incidents which they lamented for not doing in the past. What's over cannot be undone. The most relevant is the present. They should focus on how to make the financial situation going forward. I also had such mentality in the past. I come to the realisation that there is no point for me to lament on the past. It's a completely waste of time if I continue on focusing the past. Why not refocus the energies on doing something in the present which will benefit the future.

My two cents of views.


AK71 said...

Jimmy Ng says...
HMS (for His/Her Majesty’s Ship). You do mean MV Financial Freedom, Singapore Flag.
part of AK's ASSI fleet of passive income generating REITs/Trust

AK says...
No lah.
H.M.S. = His/Her Money Ship

AK71 said...

Hi Ben,

Thanks for sharing your story with us.

For sure, what is past is past.

Harness resources in the present to ensure we will continue to have resources in the future. ;)

AK71 said...

What do we call people who want to have everything for free?

AK71 said...

"... there are those who are physically and mentally whole but are complaining day in and day out. These are usually the ones who keep asking why must they pay for this and why must they pay for that?" AK

AK71 said...

Don Lim says...
I am late too.
Grasshopper and ant story woke me up.
Many paths to rome, some started early, some late, some never tried.
Hope will get there someday.

No longer dependent on monthly wages.

laurence said...

Waaahhhh, AK go on Holiday.
No wonder the Blue Moon appeared in the heavens recently.
Enjoy your rare holiday with yr parents, AK.

AK71 said...

Hi Laurence,

Kamsiah you plenty plenty. ;)

Wendy said...

Hi AK or other readers,

Unsure if you will see this comment. I have 2 Q

1. When you mentioned maxing out CPF, do you mean ERS or FRS?

2. I am in my early 40s and know nothing about FA and TA (no financial backgrd), should I just max out my cpf or should I invest in ETFs? I read on your blog that ETFs is a good way for new investors to start.

Hopefully someone see this and can advise me! TIA

AK71 said...

Hi Wendy,

I am not allowed to and I will not give advice. :p

We are lucky to have the CPF system in Singapore and if we are CPF members, we should try to max out the benefits.

Maxing out the benefits means taking full advantage of what the CPF is able to do for us and if you read my blogs on the CPF, you will get an idea of what I mean.

You will find the links to my blogs on the CPF on the right side of this page under "Wealth Creation: CPF and SRS."

ERS or FRS? That is entirely up to you and a choice you have to make only when you turn 55.

Understand CPF LIFE and make it work for us.

For the average Singaporean, the CPF is probably the best way to prepare for retirement as it is a AAA investment grade bond and also an annuity that will give us an income for life.

As for ETFs, there are many types out there. They are not all the same.

You might want to read this blog and the related posts:
OCBC Blue Chip Investment Plan.

If you are not comfortable with investing, there is nothing wrong with being a better saver to prepare for retirement.

How to maintain lifestyle in retirement?

Wendy said...

Hi AK,

Thank you so much! I was not sure that I would get a reply.
Yes, I did read your blog on maximizing on CPF and I intend to do that by transferring OA to SA.
Yes, I am aware of the RSS offered by OCBC and DBS - that is one of the vehicles I did think of... Just not sure if I should do a lump sum investment into STI etf as well since it covers most blue chip companies and I have some spare cash. I am also aware that whatever spare cash I am referring to here is something that I can lose and not lose sleep over. (I read quite a fair bit of your articles but those that have analysis on companies always seem to just glide over my head. Grrr).. Would you please talk to yourself on what you would do if you are in my shoes?

AK71 said...

Hi Wendy,

I don't know your circumstances and even if I did know, I really should not talk to myself as if I were in your shoes.

You will have to think things through yourself or talk to someone who is licensed to give financial advice (if you really have to).

Always remember that nobody cares more about our money than we do. :)

I will share a story here from a reader who was in his early 40s in 2017:
Investing in high yield Asian bonds.

Gambatte! :D

Wendy said...

Hi AK,

Sorry for pestering. Thank you for your patience (and replying).

Yes, I do care about my money so, I am trying to find out as much as I can.
Financial advisors are mostly keen to sell me ILP which I have already bought (much to my regret since I know your stand on this and why)
As such, I am muddling in here trying to make a way for myself.
Will continue to follow your blog as I try to make sense of everything on my own.

Thank you once more.

Wendy said...

Hi AK,

Thank you for your patience and replying. Sorry for pestering.
I wrote a much longer message earlier but it was gone (Grrr)
Will continue to follow your blog then.

AK71 said...

Hi Wendy,

There are two comments from you.

They are similar but the first one is longer.

So, nothing missing and everything is good. ;)

Comments are not published automatically because my blog gets plenty of spam.

Hundreds of spam comments, mostly advertisements, have been filtered out through moderation.

I am sorry to hear about your ILP experience but I am glad that you are more informed now. :)

For the benefit of other readers:
1. Reader regrets ILP but what to do?
2. How many 20 years do we have?
3. Free ILP or Term Life policies?

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