This is my first serious look at CRBR (retirement burn rate) forecasting.
People told me that as kids grow up, my burn rate would decline enough to make my cash reserve appear deep enough (or too deep) for my lifetime. This is despite inflation and medical needs. I think now I am seeing an early sign. Grandparents also see it.
In contrast, some financial planning “experts” say that retirement burn rate is 70% of prime time income. I disagree.
- my current burn rate is about half my income in Singapore.
- my current burn rate can half when kids grow up.
Q1: In retirement, how many percent of your current income is required to sustain a comparable lifestyle, assuming asset returns (yield, appreciation…) match inflation?
A: (Conventional wisdom): 75%.
%%A: 20 to 33%, for a comfortable SG lifestyle.
Q2: In retirement, how many percent of your current burn rate is required?
%%A: 33 to 50%
My 2016 burn rate analysis shows that only 2k/m is couple base burn rate, so the conventional wisdom estimate is inconsistent with my experience, and over-generalized and highly misleading.
If I retire in Malaysia or China then burn rate should be even lower.
— needs vs wants .. Pauline Teo’s book is the first to point out this difference. In Feb 2021, I told Felicia of OCBC that many retirement discussions mix wants and needs.
I asked Aaron of DBS “Among the retirees you know, there must be many whose cash flow needs become significantly lower because kids have grown up.” Aaron said yes but other retirees increase spending after retirement, often on extravagant things, such as sight seeing, dining out, gifts for grandchildren. I find this lifestyle naive (lacking wisdom) for a retiree so I asked him further “But those spends are not financial Needs like medical needs or survival needs. I can understand if I have 3 times more money than needed as a retiree, I would probably spend it, rather than leaving it to my kids.” Aaron agreed.
According to both Aaron and Felicia, some Singaporeans seem to fancy “retirement in style”. They would see their burn rate increase when they stop earning salary! Are they day-dreaming?
The rationale seems to be “After working hard for decades, now I can pamper myself !” OK maybe for the first 5 years.