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Retire worry free in Singapore soon.

Monday, April 29, 2024

I have been thinking about really retiring in a couple of years.

Confused?

Didn't AK retire 8 years ago a few months before he turned 45 years of age?

Yes, I retired from active employment 8 years ago and I have been enjoying retirement so far.

However, I am not really retired because to me that would mean not having to look at growing my wealth anymore.

In the past 8 years, I was still pretty active in managing my investment portfolio.

Most notably, I made the move to increase exposure to DBS, OCBC and UOB.

I look forward to the day when I can be absolutely laid back.

Yes, I want to be more laid back than laid back.

Terrible, I know.

However, if I can achieve that, to me, I would be truly retired.

So, can I do it?

I think I can in another 2 years.




1. CPF money

Like I said in a recent blog, I would be 55 in a couple of years and that would be when my CPF account becomes a savings account.

Assuming that I stay with the FRS in the CPF RA, maintaining the prevailing BHS in the MA, I should have $800K or more in my OA.

Simply leaving it in the OA, that would generate an interest income of $20K per year.

I do not expect the low interest rate environment which lasted 15 years from the Global Financial Crisis to return anytime soon.

So, I could possibly get more than $20K per year from the CPF OA savings if I were to continue to buy T-bills with the funds.

Conservatively, if I could get 3% yield from T-bills, that would mean another $4K per year for a total of $24K per year in interest income.




2. Emergency fund money

In my recent blog post on how much cash I was holding, if I were to continue maintaining a $250K emergency fund held in fixed deposits, assuming a conservative 2% interest rate, I would get $5K a year in interest income.

This assumes that the UOB ONE account would have stopped offering a higher interest rate by then.

Seeing how UOB has already reduced the interest rate from 5% to 4%, this is a reasonable assumption.




3. T-bill ladder money

Now, I have about $200K in T-bills, if cut-off yields were to be 3% and this is not unlikely in an environment of higher for longer interest rates, that would generate some $6K in interest income.

However, if I continue to grow this since passive income generated by my investment portfolio exceeds my expenses by about $100K a year, with $400K in T-bill in 2 years from now, I could get $12K a year from T-bills then.




4. Fixed income

Fixed income was not attractive in a low interest rate environment and I had to look for more reasonable returns elsewhere.

Obviously, this has changed in the last 2 years.

From all the numbers I have crunched so far, 2 years from now, if I were to simply continue to buy more T-bills, I could receive passive income of $24K (CPF) + $5K (Emergency Fund) + $12K (T-bills) per year.

That is $41K in total.




5. Investment portfolio

If my investment portfolio continues to bring home the bacon and I am inclined to think that it would, I would be very comfortable.

My investment portfolio generated some $230K in 2023 and this included passive income from T-bills.

If I were to exclude this component, the portfolio would still have generated more than $220K in passive income.

Assuming income generation takes a 10% hit because REITs continue to underperform, I would still see $200K from my investment portfolio.

If we should see disease X striking, resulting in another pandemic, income generation could take a hit like what we saw during the lockdown.

Banks paid less dividend.

So, knocking 40% off passive income generated by 40% of my portfolio would still see $170K generated by my investment portfolio.

This includes the assumption that REITs would perform poorly too as said earlier, if you crunch the numbers yourself.

Assuming that I am still comfortable with living on $48,000 a year and setting aside another $48,000 for parental support, even in such a scenario, I shouldn't have to worry about money.




6. Total passive income

Looking at the above points, with the aid of fixed income in an environment of higher interest rates, in 2 years from now, I would have a truly worry free retirement.

Well, worry free when it comes to money at least.

There will be other worries, I am sure.

7. Conclusion

Having come to this realization, I have decided that I don't have to look at the stock market as much as before in the meantime.

Unless there is another stock market crash, simply hold my stock positions and continue to buy more T-bills.

This is naturally going to translate to fewer blogs and videos on related topics.

This is something I have been thinking of on and off.

It is the first time I have sat down and really looked at the numbers more carefully, projecting into the future.

To be fair, it is the near future I am looking at.

I will have to talk to myself again when I turn 55.

To anyone who is eavesdropping, this isn't a miracle and it isn't a dream either.

I have talked to myself extensively since 2009 here in my blog on the things I have done to make this possible.

Stay prudent.

Have patience.

Be pragmatic.

If AK can do it, so can you!

23 comments:

darren said...

Congrats AK, you are an inspiration. Are you worried about inflation and rising costs and devaluing of our SGD?

AK71 said...

Hi Darren,

I am glad you are inspired. :)

Inflation is always going to be an issue.

Let's just hope deflation doesn't become an issue.

We just have to accept inflation and learn to live with it.

You might have missed this blog:
Inflation, passive income and updating my budget.

When crafting a plan for retirement funding, we must be mindful of inflation too:
To retire by age 45, start with a plan.

Rellangis said...

Hi AK, oh man... pls do not stop blogging even if you are truly retired.. you can blog about games or other stuff you are interested in too. Keeping your mind engaged while in retirement is important too.

Rell

C said...

Very good AK, happy you'll be retiring worry free in near future.. But not video and blog free, because we still need inspiration & reminders from AK.. haha

By the way, in your recent video, you mentioned you bought Income Growth Plan using SRS money. Personally I read about how using insurance as forced savings is making less sense, unlike in the past. For my SRS money, I have some money and thinking of just keep recycling it by buying 6-months T-bills as long as they stay above 3%.. Since current insurance endowment plans are probably giving about 3% (after deducting costs) anyway. Can you talk to yourself please?

THank you AK shifu..

AK71 said...

Hi Rellangis,

Blog about games? I doubt that would be interesting to my readers. ;p

I have built a readership base that is interested in money matters, primarily.

I know that my past blogs on games didn't generate much interest. -.-"

Will see what happens in the future. :)

AK71 said...

Hi C,

Oh, I agree that many insurance products offered to savers these days are "very complex."

I would only buy plain vanilla endowment policies which are pretty hard to find these days and Growth Plan by INCOME was one example.

I did buy one offered by DBS last year and I blogged about it too:
DBS SavvyEndowment11 and 3.92% p.a. guaranteed.
Saturday, April 22, 2023


So, still possible to find. :)

Like you, I simply buy 6 months T-bills using SRS money now as interest rates are staying relatively high. :D

SY said...

Hi AK,

Can I tap into your experience and check with you on using OA to invest in tbills?

Say 10K invested in tbills maturing on 12th Nov. Will the funds be credited back into the cpfis account with DBS in time for me to roll the funds into the next tbill that is of issuance date 12th Nov? Or I can only wait for the next tranche?

Many thanks!

AK71 said...

Hi SY,

I have very limited experience on this. ;p

The last time the funds came back for me, it couldn't make it in time for the next T-bill.

The dates were too close to each other, unfortunately.

The issuance date is different from the auction date which is usually several days earlier.

AK71 said...

Hi SY,

I should add that this was a problem because it was a 1 year T-bill which is offered less frequently.

I simply used the funds to buy the next upcoming T-bill which was a 6 months T-bill.

Kunio said...

Hi AK,
please stay active...you are just a young senior.

Doctor advice in order to keep dementia away, one must continue to work (choose to work).
And avoid δΈ‰ι«˜。

Please continue to update on this platform....you have been my virtual friend since 2011.

The Dreamzola Traveller said...

Money aside.
Health is important especially for people over 50s.
Best continue to stay active in both body and mind for something interesting, so that we can remain healthy to enjoy the fruits of our labors.

AK71 said...

Hi Kunio,

Wow! Since 2011? :o

That's 13 years which means you are not just a virtual friend but an old virtual friend. ;p

Yes, I have a list of things I would like to do to keep me active.

Thanks for the kind reminder. :)

AK71 said...

Hi TDT,

Staying active mentally is easy for me and I would even say that my mind is too active. -.-"

Staying physically active is harder for me ever since I had eczema.

Used to go stair climbing daily and some light jogging too.

These days, I just do fast walking for an hour in the evenings, longer ones when the weather is cooler.

Thanks for the kind reminder. :)

Unknown said...

Hi AK,

Do check if u get enough calcium, its good for weak nails and thin, breaking skin or eczema...

Regards,
KK.

AK71 said...

Hi KK,

Thanks for the tip!

I drink Omega Plus milk and calcium fortified black soya bean milk.

I also take a multi-vitamin daily and that has calcium too. :)

Star and Skies said...

Congrats AK!! This is so amazing to hear and an inspiration as always. It's awesome to hear you're going to be an even more chill, rich and 'lazy' retiree haha.

I just wanted to say thanks so much again for sharing all that you have over the last few years on financial literacy and the benefits of CPF. I had transferred my OA to SA then and also topped up my Medisave to BHS and SA for tax relief and also for interest diligently.

So happy I am reaping the rewards now, even though it wasn't apparent then.This year my SA has just reached FRS and also BTO is fully paid off at key collection. The mental relief is truly priceless! Especially as a single. I'm so relax now, really unbelievable.

Truly grateful to come across your blog then. Thank you so so so much again! πŸ™

AK71 said...

Hi Star and Skies,

I also like the idea of becoming even more chill and lazy. ;p

Peace of mind is absolutely priceless!

You are right!

If we do the right things, time will do the rest. :)

We don't have to jump through hoops and loops to achieve financial freedom in Singapore.

If AK can do it, so can you, and I am glad you have done it! :D

H said...

Wow 10 years since I first replied to this blog post and now I get a notification on my email..

Happy to report I formally retired about year ago :) in time for 45

SnOOpy168 said...

For the CIMB Fixed Deposit. When it matures, it should be parked at the CIMB Savings account right? Then awaits further instruction from us? I didn't select auto-renewal.
4.2% was very good rate. Come back soon ley.

Wentworth Scofield said...

Hi AK,
Thanks for sharing. Good inspiration as always. just a question though, wouldn't it still be active investor as long as you still holding stocks? you still have to read and analyze their financial reports every quarter and make decision whether to sell if it turning sour. isn't it still considered as active managing?

AK71 said...

Hi H,

Oh my, 10 years is a long time!

Congratulations on your F.I.R.E. :D

AK71 said...

Hi SnOOpy168,

I always choose the option "Withdraw principal and interest."

So, the money always goes back into my current account. :)

We miss you, 4.2%. (TmT)

AK71 said...

Hi Wentworth Scofield,

What I meant was I wouldn't want to be as active as I am today.

The plan is to put more money into fixed income instruments, deriving more passive income from those.

I should be able to achieve that 2 years from now.

Crossing fingers. :)


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