2021 Update: I now target a contingency reserve of $100k [including wife’s visible balance], based on burn rate and risk level.
in 2017, Partha pointed out that for pre-retirement planning (starting now), we need
- to prepare reliable nonwork income to continue flowing even when we are out of work permanently. This NNIA would be small at my age. I think it’s rare to see a guy my age receiving $5k consistent nonwork income.
- contingency reserve, if I’m forced out of work unexpectedly.
Partha felt I may have set up lots of passive income (the #1) but most of these don’t meet the contingency needs (the #2). Contingency reserve exact requirement depends on bare-bones burn rate during bench time.
Right after paying off the 3 overseas properties (TheBridge + BGC), my contingency reserve would drop to a dangerous level. In retrospect,
- indeed my U.S. contingency reserve dropped to USD 4k after TheBridge payment
- the BGC TOP was delayed till 2019 so by then I had substantial contingency reserve, mostly in USD 123k.
Given my wife’s earning capacity and our health conditions, perhaps I over-allocated to passive income and neglected contingency reserve:
- properties — could sell but need many months of lead time. Not a Contingency reserve
- CPF Life — locked up tight 🙁 .. Not a reserve at all.
- unit trusts, ETF… — fairly liquid. Could serve as contingency reserve if “above water”.
- I feel the Beijing home could be sold before I retire.