As from April 2013 my Journey in Investing is to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

Since 2017 after retiring from full-time job as employee; I am moving towards Investing Nirvana - Freehold Investment Income for Life investing strategy where 100% of investment income from portfolio investment is cashed out to support household expenses i.e. not a single cent of re-investing!

Currently; it about 54% to destination!


Click to email CW8888 or Email ID : jacobng1@gmail.com



Welcome to Ministry of Wealth!

This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

It is here where I share with you how I did it! FREE Education in stock market wisdom.

Think Investing as Tug of War - Read more? Click and scroll down



Important Notice and Attention: If you are looking for such ideas; here is the wrong blog to visit.

Value Investing
Dividend/Income Investing
Technical Analysis and Charting
Stock Tips

Sunday, 30 September 2012

Retire Early? But, no room for mistake!

 

Retirement and Re-employment Act

Under the RRA, the statutory minimum retirement age is still 62, but employers are now required to offer re-employment to eligible employees who turn 62, up to the age of 65.
  
 
Retire early before 62???
 
 
 
 

Uncle8888's ETA to 60 is about 10% more to destination,. It is about the right time to shift from building wealth strategy to maintaining secure cash flow with inflation adjusted at 3% p.a. for the next 25 years. There is no room for mistake for this early retirement plan before 62.


” If you have a worry problem, do these three things:

1. Ask yourself: “What is the worst that can possibly happen?”

2. Prepare to accept it if you have to.

3. Then calmly proceed to improve on the worst.”

(Carnegie 49)


How much money is enough to last 25 years in retirement?

Read? Work Less and Gone Fishing Planning Room (1)


Uncle8888 has been tracking his monthly family expenses of 5 members since 2001 and apply this formula to derive the expected annual expenses during his retirement.

Expected Monthly Expenses =  Highest monthly expenses since 2001 + Lowest monthly expenses since 2001 + 4 x Average Monthly expenses since 2001

= Total Monthly expenses divided by 6


Expected Annual Expenses = 12 x Expected Monthly Expenses

Retirement Asset required to fund 25 years of retirement = 25 x Expected Annual Expenses


This Magic Number is Uncle8888's Financial Independence Target!

What are the expenses at 3% personal inflationary rate?

Read? Personal Inflation Rate and Market Inflation Rate - Revisit

Types of expenses as follows:
  1. Living Expenses
  2. Household Replacement, Repair and Maintenance
  3. Leisure and Entertainment
  4. Medical and Health care
For Medical and Health care expenses, Uncle8888 is planning to use his fund in CPF RA, SA, MA, and Medi-Shield to cover them.

He is also not expecting to be medically treated in Private or Ward A so it should be affordable.


Read? Medi Shield or Private Shield?


Next, how to secure cash flow for the other three type of expenses?




  1. Living Expenses
  2. Household Replacement, Repair and Maintenance
  3. Leisure and Entertainment

 In retirement, there is no need for Emergency Fund as Uncle8888 can't be RETRENCHED!










For less worry and non market-dependent cash flow, one option is to do asset draw-down method for the next 25 years.
 

On second thought, Uncle8888's expected annual expenses can be considered too conservative as the past expenses covered family of three growing kids and also covered some expenses related to employment e.g.

  1. Transportation and Official Travelling claims
  2. Ang pows, white Gold, farewell lunches and dinner, birthday treats for colleagues
  3. Weekly TGIF executive lunch.
  4. Income Tax

Uncle8888 believes after retirement these works related expenses will be significantly cut down.

There is some fat in this Magic Number!


Securing Cash Flow for the next 25 years in retirement at 3% inflation rate

Three options are available:

  1. Most secure option is to do asset draw-down ONLY. It is non market dependent
  2. Asset Draw-down plus market dependent passive income such as stock dividends and rental income
  3. Market dependent passive income only. This is for wealth preservation for the next generation.

Uncle8888 will be targeting for option 1 and contingency for option 2

Here is the secure cash flow simulation based on last Friday market closing price for partial asset top up options.

The value in the table is % of the expected annual expenses that will be covered by the Secure Cash Flow from Asset Draw-down option.

The table is also for Uncle8888 to decide when he can retire early with the least worry option.


 
This partial asset top-up by liquidating some CPF stocks to add more secure cash flow will depend on market timing to execute them.

 
The Advantage of Secure Cash Flow Plan
  
The rest of the money can go to the Opportunity Fund for Growth and future Asset Top-up.
  
When the investing mind is calm, he or she will see opportunities in Bear Market rather than how to cut losses to prevent wealth erosion.
 
Remember 3M's: Mind, Money and Method!!!
 
 
 
 
 After Post's Thought:
 
What about finding 4 work-hours per week 'job' to qualify for Govt Workfare payour???
 
 
 
 
 
 
 












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