Category: retire
old retirement, not “retire young”
minimalist lifestyle in late retirement
Although the timeframe is far-out, this discussion constitutes a part of the guiding principles for my life and my children and grand children.
In late retirement (I don’t prefer “twilight years”), I want to continue my minimalist (more than “conserver”) lifestyle. I don’t have insight yet on the justifications. I feel it’s a good lifestyle and habit to keep till my last day. Perhaps it helps me reinforce the role model and positive influence for my offspring.
Disasters can happen to any of my offspring. Some of them may be poor and appreciate even a $1000 handout.
— eg of grandpa
My dad is leaving behind about USD 50k to his grand children.
I feel it means a lot to my son.
— eg of Rahul’s grandpa
Rahul felt his grandpa was a lovely grandpa…. because the amount he plans to leave to his children and grand children is too small. I beg to differ. Even if it’s a mere $100 for each receiver, it means something.
[18] retirement burn rate: 33-50% of current
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.
2points@livelihood ] President’s address
I think these and other points raised in the President’s address to new parliament are points to be explored in the upcoming parliament debates.
I feel the President’s address to a new parliament (once in a few years) usually sets out broad directions of focus over the next few months or years. Some of the policies would be adjusted within 12M, but the broad directions don’t change.
- jobs-for-citizens remain the top priority for the parliament. Three vulnerable groups: 1. low-income and 2. mature (struggling with age) workers, and 3. mid-career (i.e.被迫转行) workers with heavier financial commitments and families to support.
- find new ways to make a living, create jobs in new sectors.
She pointed out the current top threats: national protectionism; geopolitical rivalry; more volatility; disruption. Therefore, more Singaporeans may need more social safety net. She said Government will support young families to own their own homes, offer middle-aged Singaporeans more help to secure good jobs, and give them greater assurance that they will have enough resources to retire on. <– elements of the safety net and the nanny state
[21]S$900k: CpfLife^college reserve 鱼与熊掌
This sum is just a symbolic sum, not an accurate forecast
- CPF-Life ERS (enhanced retirement sum) may grow to SGD 450k when my wife or when I turn 65.
- typical top college fees may grow to USD 400k/student when my kids enroll, which will happen before I turn 65.
Q: since I can’t save enough for both purposes, which one would I sacrifice? I like this type of sharp questions that focus our mind on the real priorities.
A: short answer — sacrifice college funding. Top U.S. college is like branded products, catering to the affluent. There are many high-quality but inexpensive colleges including NUS. If your focus is quality of education (rather than FOMO, halo, vanity…), I don’t think my kids would receive the very best educatio only in a prestigious college. As explained in many blogposts, prestige is based on research not quality of education.
A: college cost is consumption whereas CPF-life is buying an annuity.
A: My sis and Zeng Sheg both agree to let the kids stand on their own feet at that age…
— liquidity
CPF-life money is committed i.e. locked in. For better liquidity, I may need to consider leaving part of the 700k in my rental properties
College funding is zero liquidity — not an investment with a liquidation value.
— student loan
In Singapore, my kids can get interest-free loans. It’s best to let the kids repay the loan, with whatever partial assistance I can provide.
— bare-bones ffree
Q: looks like I am not really financially free?
A: my earlier analysis of bare-bones ffree was based on $0 college funding. In reality, I may earmark some SGD 200k for college. Zeng
As stated elsewhere, there are some macro risks to derail my ffree, esp. risks affecting my properties. We have to live with them.
Therefore, bedrock of my financial planning is career longevity including dev-till-70.
SA cash top-up@@ No! Prefer OA→SA
Here’s one hidden and confusing restriction about SA top-up: cash top-up to SA can’t be withdrawn at all, even after 55, even if you hit BRS and pledge your property. See https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-topping-up-scheme and the diagram in https://www.cpf.gov.sg/Assets/members/Documents/Illustration_of_topup_monies_in_RA.pdf
“Cash top-up” means from outside CPF, such as bank accounts.
The liquidity-smart route to SA top-up is
- $100k housing-refund from bank account to OA, assuming your nett OA-usage for housing is below $100k
- $100k transfer from OA to SA, assuming your SA is below FRS
This way, you effectively move money from bank account into SA to earn the very lucrative 4% compound interest, and you still can withdraw it after 55. I confirmed this with CPF hotline.
Q: how much, if any, should we transfer from OA to SA, knowing it might become somewhat “free” after 55? See this blogpost
— https://www.bereadywithcpf.gov.sg/articles/how-a-singaporean-accumulated-cpf-full-retirement-sum-in-his-special-account-by-the-age-of-34/ is a personal story featured on CPF website, where a 34-year old SG national did a lot of OA->SA transfer and cash top-up.
See also my blogpost on 1m65
long-term PFF plann: doubter QnA #一劳永逸 #w1r2
A 2021 revisit — I told my friend Zeng that any financial planning (ffree++) is a piece of cake for some, if they ignore the black swans and missteps, which are often non-financial. Zeng felt many disasters can be managed with insurance. However, many black swans are not financial in nature and can’t be compensated by insurance. (Amputation compensation?)
According to the originator, black swans by nature tend to dominate the course of history , esp. over the long horizon. [19]random derailers@ffree lists many swans+missteps, but today’s blogpost is absolutely not exclusive to ffree, so most of the contents do not belong to that ffree blogpost.
My conclusion after the discussion with Zeng — the longer your horizon, the more you will see your planning dominated by swans (+missteps), which are not mathematical and hard to estimate.
Below are some common questions from friends and advisers, on my long-term financial planning, including retirement planning. I like the questions to be phrased as sharp and specific as possible, rather than vague and broad.
This blogpost is not in-depth, but offers an across-the-board comparison.
— non-stop marathon, no 一劳永逸, limited profit Lock-in
Fundamentally, There’s nothing permanent when it comes to long-horizon financial planning. The harder you think and the harder you try, the more clear this becomes.
- Prime example — Singapore’s stability, prosperity, hub status.. is never guaranteed by anyone and constantly under threat. Similarly,
- Your wellness will not last. You can’t “invest” or “buy” 10 years of wellness like 一劳永逸. You must keep working on it. Daily battle. My dad and LKY are good role models. You can lock-in BMI, cardio, muscle improvements for a few months (flexibility? a few weeks) but there’s no “capture this gigantic profit opportunity and enjoy temporary retirement for 4Y“.
- You career longevity is even more similar to the Singapore case. Body building (Continuous coding drill, QQ study..) is a lifelong hobby and training, similiar to fitness.
The worry about the uncertainty and impermanence is legit and can be life-enhancing #bbc.
— Q: can I maintain my low burn rate through retirement till my final year?
A: As show in G5 Shields@family_livelihood, this shield is in my hand. There are surely some derailers — random ffree-derailers #resilience is the best “derailer list” I have.
— Q: can I achieve career longevity like dev-till-70 and beyond ?
A: As show in G5 Shields@family_livelihood, this shield is probably even more in my control. I actively reject the pessimism expressed by Jason Fu and the like.
Some concern, some sense of uncertainty are completely legit and would motivate my diligence, self-improvement, close watch, detachment.
— Q: are the SG medical cost cushions sustainable and reliable?
A: I choose not to worry, and leave it to the PAP leadership and the healthcare industry.
— Q: is CPF-life reliable over my lifetime?
A: easy question. I think this is like questioning the insurance industry, insurance model. Annuity has been around for a long time, in many countries, not invented by SG government.
CpfLife (and other annuities) basically adress the CRBR, not the black swans.
— Q: how reliable are the other nonwork incomes?
A: less reliable than CPF-life. Therefore, I plan to liquidate some of them and convert to CPF-life, despite the inferior return and liquidity.
A: I don’t want to be too pessimistic. In fact, I want to be cautiously optimistic. Many retirees seem to receive fairly reliable rental and dividend incomes.
This question is most relevant to the 一劳永逸 concept. In theory, you can buy and hold a hero stock for life to receive high dividends, but in reality it’s like winning the lottery. See buy-n-hold a hero stock4div #ValueInvest. If it’s easy to get so lucky then why is it enviable in the first place?
— Q: how long is my good health going to last?
A: among these common questions, this question has the weakest answer from me. In fact I have no answer.
Some fear, some sense of powerlessness are completely legit and would motivate my diligence, self-discipline, close watch, detachment, kindness, generosity.
##SG medical inflation: Cushions #JL.Yuan
See also latency无底洞 for an example of medical inflation as CPIx inflation.
— My multiple layers of financial protection against medical costs.
- first layer — employee health insurance. Most Singapore employers cover major hospitalization + some outpatient
- [u] 2nd layer — shield plans for hospitalization. My own shield plan has SGD 400k/year max payout, with some minor limitations. It costs me about SGD 2k to protect my entire family.
Main complaint from Zeng Sheng — annual deductible in shield plans. This was introduced by government to /deter/ mindless overconsumption of medical resources. For example,
– unnecessary tests is a common waste in Singapore and U.S., contributing to medical cost inflation.
– hospital ward have discharge criteria to stop insured patients overstaying
Both of these layers are reimbursement-based. Additionally, I also have a small insurance paying a small lump sum without needing a receipt:
- [u] 3rd layer — early critical illness, covering cancers, heart + 30 other major diseases.
In my case, the two perceived likely killers are heart disease and cancer (but based on questionable evidence)
- [u] 4th layer — if I’m incapacitated (aging or chronically ill) and can’t live my daily life by myself, then I need full time outpatient nursing care — cost is not covered by hospitalization plans, so I bought an eldercare supplement that pays $5k/M
- [u] 5th and last layer — any other hospitalization cost is payable using CPF Medisave account, either my own, my wife’s or my children’s. In contrast, the U.S. Medicare system doesn’t offer a personal pool of fund… too much /legwork/ before you get covered.
- ZengSheng suggested PA insurance, but too complicated in my experience.
The above are the layers of protections for major medical. In addition, there are also low-cost outpatient options:
- [u] TCM (Traditional Chinese Medical) doctors are available everywhere in Singapore, and cheaper than GP doctors. My dad used them frequently in Singapore and China. So did I in NY, but only in Chinatown. When I retire in Singapore I will rely on TCM for many types of minor or chronic conditions.
- [u] Singapore polyclinics are subsidized community hospitals catering to low-income citizens. If and when I retired in Singapore, I will rely on polyclinics a lot more. In recent years, they charged me $6.80 per visit. This is not a charity. Doctors are fully certified, often graduates from NUS medical school.
[u = limited reliability, affordability or availability in the U.S. system]
— U.S. vs Singapore
Compared to the tiny red dot Singapore, U.S. is a more resourceful, rich and advanced country with economic of scale. Yet, paradoxically U.S. residents have reasons to worry about the long-term reliability of their healthcare “cushions”.
I think the U.S. (public+private) healthcare is unsustainable, fragile and afflicted with excessive waste and inefficiency. See why U.S.medical cost higher
[20]松一口气65^end@college #U.S. #w1r2
Q: At what age would you feel relieved in terms of livelihood pressure? I think most of us have yet to give this question a critical analysis.
— common Answer …. age 65
For the middle-class Singaporeans with FRS, age 65 means about $1300/M/person. Assuming reasonable inflation and healthcare taken care of, this monthly payout can match retiree’s burn rate, IFF burn rate is well controlled.
In contrast, US burn rate would likely exceed SGD 1300/M/person, partly due to Melvin3++ (car ownership + rEstate tax + med bx… )
If you have no kids in school by then, you may wish to start receiving this payout earlier (like 62) so you retire at an earlier age. You would need non-CPF solutions such as SRS, which can start paying out at 62.
— common Answer …. when my kids complete formal education and start working
This typical Chinese parent’s answer (LZ.Yu?) assumes the college cost is a major burden on the parents. Most middle-class Chinese parents I know seem to voluntarily take up the job to bankroll the children’s education.
I don’t plan to take it up as full responsibility. I want my kids to start saving up, take a student loan, and repay it after graduation.
— My answer …… when my NNIA can match my U.S. burn rate (USD 7k excluding housing?), which is much higher than SG burn rate (SGD 6k?)
Now (2020) I’m very comfortable on my cash flow high ground, thanks to my brbr + Fuller wealth + …
Paradoxically, I foresee worsening livelihood pressure relocating to the U.S. but still want to go.
HDB rental demand: decline over50Y #Zeng+Felicia
— Felicia cautioned me .. HDB rental demand from foreigners could fluctuate in the long run. In the U.S. rental market, half the tenants are local Americans. Singapore rental market is more dependent on foreigners (high home ownership rate), so she sees more risk in my HDB rental model.
Why hold on so tight even after relocation to U.S.?
* low maintenance
* valuation volatility managed by PAP
When I explained to her why I won’t sell my HDB even while I’m settled in the U.S., I realized my deep bias and sky-high confidence in the PAP and SG economy. Over the long term, my confidence would be put to the test. Compared to China, U.S. and SEAsia, I still feel far more confident about SG HDB property. This is a heavy bias, not based on enough data. Once I live through and understand U.S. rental property risks, I might conclude that SG rental market is low maintenance but low yield and not-so-stable.
— Sheng.Zeng’s views:
- The entire SG economy has traditionally relied on foreign workers. If you worry about HDB rental demand till 2064 (age 90), then you have bigger things to worry about, including SGD strength, CPI inflation, medical inflation, cpfLife… all of which are more impactful than HDB rental yield.
- Q1: Why must you keep the HDB flat? Legacy? I now feel leasehold is not the best form.
- Q2: What do you need the rental income for, exactly? If for a modest retirement [CRBR $3k] you don’t need this income, then no real worries about “decline”! If the decline represents a sub-optimal return, then there are many sub-optimal returns in my career.
- Now I think 50/50 chance I would treasure this “extra” disposable income. In that case we can consider various ways to cash out. Lease buy-back or downgrade to a smaller home
- Jolt: So taking a step back, the preoccupation with HDB rental yield is perhaps a self-imposed, /hallucinatory/ dependency. My retirement doesn’t depend on it .. Zeng’s wisdom.