Tea with Skipper: How much do we need to retire on?

Some time back, Skipper very graciously made me a promise to do a guest blog to share his thoughts on his retirement and what he thinks is sufficient for him in terms of money needed. True to his word, here is the blog:

First some caveats :
 

• What is written should not be construed as advice but merely the planning and thoughts of an individual who has stopped full time employment.
• To stop full time employment, you must not have any outstanding debts such as mortgages for your dwelling or any other item you cannot pay off immediately should the need arise.
• You do not have any dependants or children who are not earning their own living.
• You are of reasonably good health without any major dependency on long term expensive medical treatment.
• You own the dwelling you are living in.
• Circumstances will vary from individual to individual and the list is by no means exhaustive.

 

Now that the assumptions are out of the way, we can seriously look at the expenses you would incur when you don’t have a monthly salary. Before we look at the day to day expenses, some important and in fact necessary expenditure must be in place. In terms of importance, they are as follows :

Insurance

The most important are the H&S policies like MediShield. I cover my wife and me with the Enhanced IncomeShield with Riders. Better still if you can go for one that covers private hospitalisation as well. This is often one of the neglected areas, which will become very obvious when we fall sick and worse still if it is chronic.

Travel insurance if you make occasional trips abroad. Get an annual coverage if you travel often. We cover ourselves with an annual policy at $650 / year per person.

I intend to cancel all my WholeLife policies this year as we do not have any dependants. One policy which I have been faithfully paying for the past 20 years for a $75k coverage will return $38k. For TPD, I will buy a Personal Accident policy.

Annual Expenses

These would include Property Tax, Car Road Tax and Insurance and any other expenses which are particular to each of us.

Monthly and Daily Expenses

These would include conservancy charges, newspapers, PUB, telephone, internet, cable TV, petrol, parking charges, membership dues etc. List your own and tally the total amount.

Contingencies

Household maintenance/repair charges, replacement of appliances, dental treatments, car maintenance/repairs.

Leisure

Travelling expenses, course fees for leisure activities or classes. Set aside a certain amount for these activities. 

For my wife and I, we would need about $5,000 a month without the Leisure activities. We have put a sum of $20k for the leisure activities. So, it would all add up to $80k per year.

To be on the safe side, I have planned for a passive income of at least $100k per year but would prefer it to be $120k to cater for inflation in future. The additional sum can be reinvested for more income to cover inflation.

The $5,000 figure works for me but I am sure many would be able to do with lesser. One of the ways would be to cook at home more and eat out less. It is not only cheaper but also healthier as you can control what you put into the food you are eating. 

Please work out your own figures and add whatever buffers you feel comfortable with.

Skipper, thank you very much for sharing. :)

Read another guest blog:
Tea with EY: Money talk, money laugh.

Related post:
Why a wealthy nation cannot afford to retire?