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How much passive income is enough for you now? (AK tells you how much he needs now.)

Tuesday, October 22, 2019

I have always been a worrier.


Some tell me that I think too much.

I cannot help it.

For some reason, I always ended up in schools that required long bus rides from home and I would spend the time on the bus thinking.

It is probably because I am a worrier that I have sleep disorders.

Has achieving financial freedom freed me from this mental illness?

Not at all.

I just worry about different things.

Told you AK is mental.






Anyway, I read somewhere that penning down my thoughts helps to deal with the problem and this is something that I do now and then.

Sometimes, I would share those thoughts here in my blog and this is one of those times.

I don't know if the illness is contagious.

You have been warned.

Pause.

Pause.

Pause.

Still here?

OK, I guess I am not the only crazy one here. ;p






This blog is not going to be just about money.

It is also going to be about family, my family.

I turn 48 this year and my parents are in their 70s.

My parents worked hard till their late 60s.

While they were working, they didn't ask for any financial support from me.

I remember blogging about how lucky I was that way.

Read:
How did AK create a 6 figure annual passive income?





It is probably a big reason why I was able to achieve financial freedom at a relatively young age.

My parents, however, are not very savvy financially and they are also pretty stubborn.

Not a good combination.

Although not absolutely sure that it would happen, I fear that they might outlive their savings.

Like with so many things, of course, it could be just me worrying for nothing.







Although they didn't need any financial support, in the last few years, since achieving a six figure annual passive income from my investments, I have been giving my parents big red packets on their birthdays, on Mother's Day and Father's Day.

Big red packets?

How big is big?

The red packets amounted to $20,000 or so a year.

There was a year when I gave them $40,000 in total.

Pretty big to me.


In those years, I had both earned income and passive income.

So, it was definitely something I could afford to do more easily.






What about now?

Of course, I became totally economically inactive about three years ago.

Read:
Income tax payable in 2019?

Even so, lacking earned income, I was still giving my parents red packets amounting to almost $20,000 a year.

I can still afford to do so even if I must depend solely on the amount of passive income I receive from my investments.

However, earlier this year, I decided that things would have to change.





So, how like that?

Is AK going to cut back, you wonder?

I wonder how many think that way?

No, not happening. 

Although my parents did not ask for help, earlier this year, I decided that I should help to pay a big proportion of their major recurring expenses.

Financially, it means a doubling of what I give to my parents to $40,000 a year and this is going to be a long term commitment.

It is not something that I am doing just for one year or two.

It is something I gave a lot of thought to before deciding that I can pull this off.








I want my parents to be able to enjoy their retirement as much as possible.

I don't want them to have to worry about money.

I want them to have peace of mind.


They deserve it.


Even doing this will not stop me from worrying about my parents completely but it definitely makes me happier that I am doing more.

Of course, a move like this would mean having less "retained earnings" to invest with.

How like that?

Well, unless we are very rich, money will always be a scarce resource which is why if we want to retire comfortably, growing our wealth has to be a priority for most of us.

However, we have to question when this priority becomes less of a priority in life?

Know what I mean?





Anyway, I decided that putting more resources into growing my wealth at a faster pace isn't a priority for me anymore.

It is no longer a need for me.


I probably have enough financial resources I will be able to draw upon as well as sufficient income generating assets to be quite comfortable for the rest of my life although I suspect I will always feel somewhat insecure if I don't grow my wealth somehow.

This feeling of insecurity is unlikely to ever go away.

I guess it keeps me on my toes (and also keeps me awake at night sometimes).

Yes, it is just AK being mental.






Fortunately, I am a CPF member.

I will still be voluntarily contributing to my CPF account and this means setting aside almost $40,000 of my passive income annually.


Unless something disastrous happens, this is something I plan on doing until I am 55 years of age, at least.

When I turn 55, I will decide if I should continue to do voluntary contributions or if I should enjoy life a bit more.

After all, it is most likely that even without any voluntary contribution after I turn 55, I would have quite a meaningful sum of money in my CPF account by the time I turn 65 thanks to the magic of compound interest.

Read:
$1.5m in CPF savings by doing nothing.






The question I would have to ask when I turn 55 is whether it would be enough of a safety net.

Would the monthly payout from CPF LIFE (i.e. the annuity by the CPF) be enough to pay for the basics in life by the time I turn 65?

I will cross the bridge when I come to it, I suppose.

After all, I could be worrying for nothing again since I could also draw upon my CPF savings in the OA and SA which is in excess of the Full Retirement Sum in the newly created RA at any time once I turn 55 if things were to go horribly wrong with my investments then.

Knock on wood.

Read:
CPF LIFE Payout Estimator.










So, $40,000 for my parents and $40,000 for my CPF account.

That is about $80,000 which I have to put aside yearly.

What about the rest of my passive income?

A big chunk of what is left of my annual passive income will be used for other expenses.

After some rough estimates, $40,000 a year seems like a fairly comfortable amount to cover 

1. recurring expenses, 

2. donations to charities, 

3. outings and gifts for family 

as well as 

4. other discretionary spending.

Having what I have now, I should not (and really don't want to) live life on a shoestring budget like I did once upon a time.

It was pretty crazy and some would even say miserable to live on $300 a month.

I am still learning to be more easy going with money.


I think I have made good progress though.

Read:
Is AK a rags to riches story?







So, it seems that I would need roughly $120,000 in annual passive income to cover everything.

If my investments do not generate significantly more than $120,000 a year in passive income, there really isn't going to be much left of it to invest with.

Anyway, doing what I have been doing for so many years, I hope I continue to be approximately right most of the time in my decisions.

A change in my priorities this way isn't a bad thing, I feel.

After all, money is but a tool and one of its functions, if not its main function for ordinary people, is to make life better either now or in the future.

Anyway, it is not as if my personal wealth will stop growing altogether.

Although at a slower pace, my personal wealth will at least continue to grow steadily.

This is achieved mainly through growth in my CPF savings which, of course, I think of as the investment grade bond component of my portfolio.

Some of you might be interested in this blog on bonds which I penned in 2015:

Read:
Why have bonds in our portfolio?






Of course, there could be changes in future.

For the foreseeable future, however, having enough passive income 

1. to cover my expenses, 

2. to help provide for my parents 

and 

3. to grow my CPF savings 

is sufficient to make me quite happy.

OK, I guess that's it. 

------------------------

This blog has taken me way too many hours to craft and I hope this very personal sharing session has also provided you with some food for thought.

The only constant in life is change or so the saying goes.

So, it is probably good not to be too rigid about how much passive income we need.






Know that life might throw us some lemons from time to time.

If we are prepared, we will be able to make some lemonade.


Having buffers, I feel, is always a good idea.


So, how much passive income is enough for you?

Put on your thinking caps and try to have fun. ;p

Give me freedom!
Read: Give me F.I.R.E.






Mr. Bean's Teddy is on F.I.R.E. ;p

Related post:
My family almost went bankrupt.

In case you missed it, the following blog was published earlier this month:
3Q 2019 passive income: Numbers.

31 comments:

GlobalPassiveIncome said...

You are a filial son!

AK71 said...

Hi GPI,

Parents are usually very giving and also very forgiving when it comes to their children.

My parents gave me so much in my growing up years.

I do feel that I am still lacking as a son.

It is a feeling that I am not doing all that I can do.

I believe this is a big step in the right direction.

Thank you for taking the time to listen to my thoughts on the matter. :)

konmmo said...

Hi AK,

You've come to a stage where, due to the size of your investable assets, you are able to slow down and give out more.

Being able to have that flexibility aside, I think the sense of fulfillment is immeasurable.

Tbh, I give my parents much less than what you do because of my hunger to grow my investable assets but still this article is making me rethink.

As always, thanks for sharing

AK71 said...

Hi konmmo,

Something that I thought of sharing in the blog but did not is related to how short life is.

I did not share this because it is rather sad.

It is sad but probably true that I will outlive my parents by 20 or 30 years.

There is probably ample time to do what I want to do later in my life but time is probably not as plentiful for my parents.

I don't want to regret later when they are gone that I did not do more for them in their golden years.

I am glad that the blog got you thinking too. :)

keng said...

As always, before you can take care of parents, you will have to take care of yourself too.

Remember to go for regular health check up, especially since you are living the life and playing Neverwinter on a regular basis.

Build a strong and healthy character, just like in the game :)

hyom said...

Hi AK71,

You have earned my respect for being a filial son. You are a good role model in this aspect. This post is one of my favourite posts on your blog.

I think it is more meaningful to talk about giving and sharing your wealth to your loved ones than how much passive income a person is getting, how big is the portfolio size, what is his networth, how much is his networth by age X etc.

For selfish reasons, I certainly hope my children will use you as a role model in this regard. Haha. By the way, in case my kids are reading your blog, please talk less about indulging yourself in computer games . This is one aspect I hope they don't pick up. LOL. My kids still don't have the discipline to control themselves at this point in life.

Unknown said...

hi may I know why u choose to voluntarily put money in cpf instead of investing in shares?

AK71 said...

Hi keng,

Thank you for the reminder.

I must do better.

I don't think I want to be like the character I play in Neverwinter in real life though.

Dragonborn.

You might want to Google it. ;p

AK71 said...

Hi hyom,

Long time no chat. :D

Thank you for taking the time to write.

It is a pleasure for me to read your comments, always.

I am glad you like this blog. :)

It took me many hours to craft.

Just kept adding stuff from time to time over the weeks.

The original blog ended up being much longer than what you see here.

I decided it had to be pruned mercilessly before I hit the "publish" button.

Blogs like this one reveal more personal things and provide a window into my life.

I might have achieved financial freedom but I am really just another regular guy.

I am not sure I will always succeed but I will surely try to be a better person. :)

If your kids are still very young, I don't think blogs like ours will appeal to them.

So, no worries there (for now). ;p

AK71 said...

Hi Unknown,

I feel that I already have a pretty substantial portfolio of REITs and non-REITs.

As we grow older and, definitely, in our retirement, we should try to have a higher percentage of investment grade bonds in our portfolio.

I have mentioned before that I think of my CPF savings as the investment grade bond component of my portfolio and I said so in this blog too.

I also hyperlinked a few blogs in this blog on the matter of CPF savings and having bonds in our portfolio.

You might want to read those.

Also, you might want to read this:
8 years AAA bonds with 2.5% and 4% coupons.

Please bear in mind that this works for me but it might not work for everyone.

lulu_loves_be@rbrick said...

Hi AK,

You are such a filial son!!

As you have said, you will most probably outlive your parents by 20 years. I hope that you also spend more quality time with them instead of just giving them money. As parents, we definitely prefer time spent with our loved one to receiving money.
So maybe less Neverwinter and more time spend with them.

AK71 said...

Hi lulu,

I spend a full day with family every week which usually is Sunday.

My parents are rather independent and enjoy travelling alone or together.

So, I don't really have to worry about them that way.

I don't know if I have said this before but I am so glad I discovered Neverwinter as it is my escape from real life and helps to keep me sane. ;)

Although the time spent on blogging has reduced, Neverwinter has not affected the time I spend with family.

Fact that I am still blogging and replying to comments shows that Neverwinter is not controlling me and that I am still in control (I hope). ;p

Thank you for the suggestion. :)

Betta man said...


https://www.businesstimes.com.sg/companies-markets/eagle-hospitality-trust-calls-for-trading-halt-after-reports-on-possible-lease

The yield is almost 10% now. When trading halt is lifted, price is likely to crash and yield will shoot up above 10%. Do you think the risk is worth taking ? Thanks.

AK71 said...

Hi Betta man,

I looked at this business trust recently last month.

I decided that I shouldn't take on more risk in retirement.

The risk looked very real and also significant to me.

waikaye said...

Hi AK,

They say do what makes you happy, and to make it happen clearly you've put a lot of thought into calculating the numbers and making the commitment to further provide for your parents. It's humbling to know that for someone with your level of wealth you still feel uncertain about the future, but no matter how it turns out I've a feeling you will make it work.

Happy for you on your decisions and changing thought processes about money.

AK71 said...

Hi waikaye,

I am what some would call a "peasant" millionaire.

I try my best to be a happy peasant lor. ;p

As for feeling uncertain about the future, unless we are very rich, I think it is only normal.

OK, it could be that I am abnormal. :(

Hmmm...

Related posts:
1. To be a happy peasant.
2. Success as an investor.
3. Cash flow is most important.

AK71 said...

Oops...

Link #3 seems to be broken.

Let me try again here:
Cash flow is most important.

Chenheyuan87 said...

Hi ak.. Can i check if you invest in overseas market? A lot of materials are suggesting that we need to have 50/50 40/60 allocation between sg and foreign shares. Can I have your views?

Invest Sg said...

hi AK,
It's been a long while since you've shared about family and very glad you shared how you intend to provide for your parents and providing a glimpse into your personal life. A very filial son indeed! keep writing..

AK71 said...

Hi Chenheyuan87,

You will find my answer in these blogs:

1. Could we be financially free by investing in SG only? (Part 1)

2. Could we be financially free by investing in SG only? (Part 2)

We have to do what not only works but also what we feel comfortable doing. :)

AK71 said...

Hi Invest SG,

I am glad you like the blog.

Just me talking to myself as usual. ;)

Bananamint said...

AK,

I am glad that you are writing more now :)) It's always nice to read your posts, posts like these remind me that you are just as human as us too..

When you worry, maybe try living one day at a time or just being at the present. That should help to reduce the worrying by abit :) You are very blessed to have parents who are independent! and you too are such a good son :)

AK71 said...

Hi Bananamint,

I have been more fortunate than unfortunate.

Being inclined towards Buddhism, I think I must have accumulated more good karma than bad in my past lives.

I hope to do the same in this life. :)

Thank you for the suggestion regarding my worries.

It is a deep seated mental condition and it is something I will have to live with.

You are right, of course, and I will try to take it easy. :)

As for blogging, I haven't been doing much this year.

Blogging happens in spurts now.

When the writing bug bites, I will blog. :)

Rellangis said...

I always love reading your blog. Money is but a tool for achieving things you want in life. Being able to support parents in their old age is a very noble and filial thing to do.

AK71 said...

Hi Rellangis,

I am only doing what I feel is the right thing, as always. :)

Glad you enjoy the blog. :)

Ric said...

Hi AK,

Thanks for sharing. I am sure you are an inspiration to many avid readers of your blog.

Kudos to you for making the commitment to provide financially for your parents. I would love to do the same at some point in time too.

Appreciate your efforts in helping the investment community with your candid self-talk.

加油!

Cheers!
Ric

AK71 said...

Hi Ric,

If my blog has a positive impact, I am glad.

Of course, it is important to remember that I am just talking to myself here and it is never my way or the highway.

All of us have our own circumstances to work with, for sure.

Thank you for the encouraging comment. :)

csky said...

Hi AK,

You are in a very blessed position to provide for your parents so generously.

Do they both have good medical insurance (preferably private hospital if possible)? If not maybe consider setting aside a pool for their medical expenses. Those can come fast and furious when it happens.

If your parents enjoy traveling, consider going on more trips with them. They will be great memories for both your parents and yourself. Your parents are very blessed, to be healthy, mobile and no financial worries.

I recently lost my dad, so I know you can never spend too much time with them.

AK71 said...

Hi csky,

I am very sorry for your loss. :(

I lost my grandmother not too long ago and it took me a while to recover. :_(

It takes time but I hope you are recovering well.

I tried to get both my dad and mom to upgrade their H&S plans many years ago but only my mother listened.

I blogged about it too:
Enhanced Incomeshield for my mom.

As for travelling, I don't like travelling out of Singapore very much anymore but I did go on a cruise with my parents last year.

I also make day trips into JB with them once in a while if that counts. ;)

csky said...

Thank you AK. Yes, recovery has been rough. :(

Same for us, managed to get some health insurance for my mom but too late in upgrading for my dad. Thankfully we had been saving regularly for their medical expenses, otherwise things would have been even more stressful.

JB is wonderful; affordable food, affordable shopping :)

As long as they enjoy themselves, even the Singapore Zoo or Bird Park also good. :P

AK71 said...

Hi csky,

I know it must be. :(

Stay strong because time will heal.

My situation with dad is the same.

Stubborn fellow.

He will have to depend on Medishield LIFE and I really thank our government for this or my dad would be without any H&S insurance.

Hey, I told my mom the same thing recently about spending time together.

It is the company that counts and not where we go. LOL. ;p

Take good care of yourself and I will (try to) do the same. ;)

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