Tag: t_NNIA

passive or activeMgmt income

[23]class reunion: why salary still relevant2frree

Posted on by tiger40490

When I told Stephen.Y and YY.T that I can retire based on my savings + NNIA, what they don’t know is my salary now and in the foreseeable future. This is the invisible elephant in the room.

Q: Mathematically, my current salary is an irrelevant term in the retirement equation, in which the income side consists solely of NNIA. So why is current salary relevant, and highly relevant.

A: my current salary remains a huge factor affecting my motivation to continue working  — hardworking vs semi-retired vs fully retired. This decision is very relevant to my ex-classmates and cohort until we turn 60.

A: If they come to know that my income is 3k vs 30k, then this data immediately anchors their perceptions of my current burn rate and “quality of life”. They would have some idea about my “retirement equation” amounts.

A: As I told each audience, my ffree is mathematically barebones, based on a conserver lifestyle. Therefore, each month when I get a pay cheque, it /strengthens/ my nest egg and elevates my ffree “high ground”.

Attachment to salary? Impermanence? Indeed as we age, we would gradually lose income (similar to losing libido, erection, flexibility,,,) so income is not something to cling on to. In contrast, I think it’s more strategic to cling on to exployability, devTill70, family bonding, guaranteed NNIA,,,

Malaysian同龄人in his40s: realistic PFF

Posted on by tiger40490

I find this 2013 description on [[Personal Money]] rather detailed and realistic, offering multiple revelations and lessons for me. The subject is Mr Lim who wrote in to the columnist Gina Wong , to have his financial health [goals, projections, gaps] assessed in her column [[Money Makeover]].

  • 1) MYR 866k investment assets (29% in REITs, 26% in other stocks, 38% in fixed income funds, 7% cash or MM assets), generating a 8% return — questionable, unsustianable due to high equity allocation
  • 2) MYR 80k emergency fund
  • 3) MYR 500k “personal assets” .. vague.. presumably an estimate of his other assets .. perhaps home equity, 401k
  • 4) minus MYR230k total liabilities .. any debt beyond mortgage would be a worrying sign.
  • ^^^^ MYR 1216k Net asset, adding up the 4 line items
  • MYR 95,295/Y (almost 8k/M) family burn rate, on a MYR 230k income, at age 41. The author (Gina) thinks this burn rate is thrifty and uncomfortable. However, I guess many working class Malaysian families as of 2013 probably spend much less.
  • MYR 60k/Y squirreled away at age 41 = “approximately 25% of his income”, perhaps including  endowment bx.
  • ^^^^ 230k-95k-60k = 75k/Y earned but not spent not saved, so I guess it consists of payroll deductions [tax, 401k, donations, medbx, discounted company stocks,,] This large discrepancy is easily missed by most readers, who would get walk away with a misleading estimate of his brbr or savings rate
  • MYR 120k/Y target NNIA from age 55 through retirement. 60k/Y CRBR + 60k/Y to be reinvested to fight inflation
  • .. I find this NNIA ambitious/challenging if he wants to rely on stocks. Reits and bond funds are slightly less unreliable.
  • —- Lim’s other financial goals are a LG2 focus of this blogpost:
  • MYR 3300k age 55 target balance. Rather ambitious.
  • MYR 1200k  target college fund to help his 2 kids
  • No mention of his inherited wealth or his wife’s contribution.

Q: which portions of his snapshots are oversized/undersized?
* rEstate (conspicuously missing) : undersized
* 401k (conspicuously missing) : undersized
* debt: oversized.. should be close to zero at 41
* nest egg: oversized
* target NNIA by 55: ambitiously oversized

Q: is he on cash flow high ground or low ground? The author says high, notwithstanding insufficient insurance
Q: Brbr? 230k/96k = 2.4 very good
Q: is he a big saver, big spender?
A: author is 100% sure Lim is a “frugal family man” who , 5 years ago, started living “below his means”.
A: At the end of the review, author recommended Lim “upgrade family lifestyle” … relevant to me
%%A: not a big spender, but neither a big saver. I assume Malaysia cost is lower than Singapore, so MYR 8k/M family burn rate is too high

Q: how is his Earn/Save/Invest capabilities? Remember Lim is serious about retiring at 55.
%%A: aggressive investor

Q: Fuller wealth?
%%A: can be better. Lim’s current burn rate (8k/M) and Crbr (5k/M) are rather high

 

[17]sReit as proxy+parking@@ NO

Posted on by tiger40490

I feel up to 10k investment is fine if I have surplus USD. Target dividend = 6% of the initial investment amount.

Li Qi has more experience with sREITs and felt the supply/demand dynamics are more like stocks than properties. But I guess long-term trend and DYOC are the things to focus on, and sReits may resemble rEstate.

There are many online articles comparing REITs vs real properties. It may be too time consuming to read all of them.

— if a SGX REIT offers consistent 5.5% yield without the legwork, then i think it’s comparable to PeakRetail in rental yield.

— Compared to real properties — reliable dividend on the back of a real estate asset with capital appreciation potential.

  • 🙂 much smaller quantum
  • 🙂 much better credit risk
  • 🙂 much more liquid .. lower transaction cost, faster completion
  • 👎higher volatility
  • 👎capital appreciation much lower, if any. Probably similar to the capital appreciation of stocks.

Q: if you hold 10Y, is there a good chance of appreciation? I feel yes for real estate in parts of Asia, tristate but but not in many U.S. states and not for REITs

https://www.99.co/blog/singapore/reits-properties-investment/ lists many risks, complications and active management required of landlords. With these “risks”, the  return is presumably much higher than REITs. However, the Singapore data in this web page proved me wrong.

— Compared to a high-dividend stock

I don’t want to take further risk than REIT. I feel a dividend stock would have much higher risk, too uncomfortable for me.

 

 

late90s engineer salary^curInvInc ^unrealizedProfit{trad` #NUS

Posted on by tiger40490

At NUS while I was immersed in academic study, there is a lot of quiet chatter among fellow students, about investment and leveraged trading. Rumor was spreading that active trading could generate 100k/Y profit. How about an engineer’s salary at that time? About 5k. Some evidence ..

  1. in 1992, My HJC classmate EnJia said his engineer dad was earning 3k+
  2. in 2005, some Tyco engineer was earning 5k.
  3. In 2013, I heard that some Japanese MNC managers were only earning 6k.

Now in my late 40s I have a different perspective/perception — 1) unrealized profit is not an income replacement 2) Consistent periodic cash payout is, but much harder to achieve 3) engineer’s salary is modest but reliable over 40Y. An engineer needs to stop comparing with the exclub — zzcl[知足常乐].

With current income, we feel confident to spend the income. In contrast, with unrealized gains
* sometimes we are unable to cash out easily and quickly .. consider rEstate
* sometimes the bid/ask or commission is too high, eroding actual net profit .. consider bccy
* sometimes the paper profit can quickly turn into paper loss

[20]松一口气65^end@college #U.S. #w1r2

Posted on by tiger40490

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.

##NNIA=NET nonwork income from asset

Posted on by tiger40490

— The NNIA concept .. Non-work incomes can come from gov, pension/annuities, adult children, inheritance, cut-loss sales,,, NNIA is about income from productive assets.

However, negative incomes (i.e. expenses) are more overlooked and deserve more attention than the positive income. Better list the expenses on top.

Jolt: Whether you like it or not, the reality is, the expenses are the rent you pay to hold the “cash-cows” generating the payout.

An income stream from an asset may require periodic “work” such as maintenance. I guess it could be a BBB or RRRR type… see ##pff complexities]old age . IFF the workload is too demanding, then it would not be nonwork income. Eg: managing a “hotel” of rental properties.

— Components of (usually monthly or quarterly) nonwork net income from asset:

  • -ve mortgage + rEstate tax
  • -ve HOA — $0 for some SFH or MFH
  • -ve other haircuts on GNRY
  • -ve holding cost of gold
  • -ve trailer fees
  • -ve income taxes on realized gains
  • cash dividends
  • cpf-life payout
  • .. CPF interest is not cash payout. Instead, it’s similar to the theoretical accrual of reference value in AllianzIncomeProtector.

envious@%%NNIA #cRisk

Posted on by tiger40490

See also hi-risk-hi-INCOME: my chosen assets

My cohort in U.S., SG, China have low passive income. Very few are envious of the passive income streams because

  1. most of them aim at windfall not current income
  2. most of them usually buy (sizable) properties on loan, eroding rental yield
  3. most of them only buy residential properties, with lower GRY, and worse haircut.
  4. some buy China residential properties or SG condos … lower GRY
  5. some buy U.S. residential properties (tax) but rent to a single family
  6. most of them do not fancy dividend stocks. Remember Tanko, Kun, AshS
  7. Last but not least — most avoid credit risk. These peers stay (far) away from those credit risks as if they were drugs. These peers are Never serious when they consider these investments as the credibility of the counter-party is highly questionable to them… Fear of unknown:
  • overseas properties built by lesser-known developers
  • Energy12
  • Jill’s Germany and Brazilian projects
  • Jill’s AsiaProperty
  • —- Instead, my peers mostly invest in traditional or mainstream assets to generate (relative low) passive incomes
  • dividend stocks
  • REITs
  • bonds
  • local rental properties

(1st turning point) when I receive the key to a fully constructed unit, these peers have some “regret” as they overestimated the credit risks.

(2nd turning point) When I start receiving rental income, these peers have more “regret” because another credit risk concern subsides.

However, when I experienced excessive, hopeless delays in Majestic Village and BGC, these peers have some “vindication”, because they can see “Victor underestimated the credit risks.”

So, given the credit risk, I don’t think there would be a lot of envy. Another reason is, my passive income assets show sluggish, uninspiring appreciation.

credit risk overshadow` %%NNIA #cushions #div

Posted on by tiger40490

k_cpf_life ,,,,, k_FLI2

As mentioned in other bloposts, seeking 100% reliability is futile, disappointing, doomed ,, similar to seeking perfect a life partner.

  1. — ranked by my confidence in the perceived dependability
  2. [S] CPF-Life and other insurance products, but over longer horizon, inflation risk is higher
  3. FLI2
  4. investment-grade bonds
  5. [S] HDB rental income — I know the market, the location, currency
  6. The dividend aristocrats have maintained DYOC for decades. See the Zeng discussion
  7. BGC rental — currency risk, asset-country risk. Luckily, it features mature country and mature location. Thank God I have NCT and Aleris to help me.
  8. PeakRetail — CapitalLand, currency, asset-country risk
  9. BridgeRetail — similar
  10. MIH — grade-A office has lower rental yield than shops; less mature location
  11. What about China rental income? Low yield.
  12. [S=thanks to Singapore government]

— fake NNIA paid from principal .. Fundamentally, I feel that part of my NNIA (GRR) is paying out from principal, similar to some high-yield mufu. In comparison, CpfLife, BGC, FLI2,,, are sturdier

— credit risk

I think even an A+ bond has a non-zero risk of default. In contrast, a junk bond has a higher default risk than investment-grade bonds, but still below 2.5% probability. My Ritz junk bond did default.

My PeakRetail presumably has a higher credit rating than BridgeRetail. Flatiron’s credit “perception” is mostly due to Ascott.

Energy12 presumably has a low credit rating.

My HY/PE (MajesticVillage and AsiaProperty Partnership) has junk bond credit risk.

The dividend aristocrats (see my blogpost) have maintained DYOC for decades. No credit risk per-se.

In my ffree projection, it’s dangerously naive to treat GRR as guaranteed like cpf-Life. We need to factor in the credit risk and market risk.

— “cushions” (not ‘protections’) against credit risk #open question

  • dev-till-70: health and in-demand tech skills
  • diversify the passive income streams
  • CPF-Life as bedrock
  • HDB rental
  • BGC rental

passive^active: job, investment..

Posted on by tiger40490

Instability, uncertainty is a fundamental part of my life. They may be part of your life but some people’s lives have rather low instability.

For me, it seems a good practice to embrace instability.

However, some stressors like PIP are too toxic for my “system” to manage, so I may have to avoid them.

Notes:

  • [1] my passive investments are not “safe” as comparable to insurance, time deposits etc
  • [2] startup has high risk of firm failure, but my calibre could be good enough.
  • [3] I started with mutual funds and had very poor returns. Then I had some alternative investments
  • [4] BGC, HDB…
HFT tech firm, startup ibank job contractor
#passive		 active invest #rental,stock passive invest[3] remote rental prop [4] khm shops
overall rating #9 ? #2 #1 #3 #6 #2 #1
income unsure 200k+ 170-190k 150-220k unsure unsure up to SGD2k/M up to USD1500
stability of income risk@kickout [2] worse than contract good poor reliability poor reliability poorer than khm good for now [1]
expectation@me worst ? bad best much worse than passive zero zero zero
stress like PIP stigma worst ? bad best worse than passive zero low zero