Previously I made mention of how I intend to approach my (semi-) retirement at 45. Here are my projected retirement expenses again, close up:
I didn’t manufacture these numbers out of thin air. Most of them are based on what I have already been spending, with some adjustments based on a non-working lifestyle.
Regarding my parents’ retirement, I personally calculated that with their current HDB flat paid off, they should be able to live very well on $2,500 a month as long as they don’t do the Santa Claus act (my dad can give quite indiscriminately). For now, I anticipate that my sister and I will each contribute $1,000 a month with the remaining coming from my parents’ own savings. Heck, they can even rent my current room out for some extra cash once I move out of the house (and once they come to terms with it).
Based on the numbers, I should be able live quite well on a rental income from a well situated paid off HDB four room flat (about $2,500 a month), if I didn’t have to consider the support of my parents. The situation becomes pretty marginal once parental support is involved.
However, part of my retirement plan is also to make sure I have small dividend returning portfolio, giving me something like $10-12K a year (300K at 4% dividend yield). I may also annuities eventually, but only if the interest rate environment is more favourable. If this is also considered, then I have more than enough to cover all our costs with enough left over for small vacations here and there if we want. I am also likely to continue working part-time for a while, just to make sure I don’t drop out of society totally. All that income will be gravy.
It seems pretty cut & dried, but there are a few challenges ahead of me though:
1) Locking in the condo capital appreciation at the right time. Buying a HDB in cash hinges on this move and I have two years to go before I can sell without the penalty of paying the seller’s stamp duty.
My father wants me to keep the condo instead of exchanging it for a paid off HDB. The HDB will give me a better rental yield and cash flow, but the condo has better chances of further capital appreciation. So this is where my father and I locked horns – I want the cash flow to stop working; my father sees it as throwing the chance to earn big money away.
Naturally, I have had to explain to my father about my early retirement plans and how this one move is critical to the whole project. And then, I had to sit and listen to a lecture about wasting my youth and potential, and how things will not always go as I plan, what will I do in retirement, yadda yadda yadda…
I could unilaterally decide, of course, the condo being mine and mine alone. But that is probably not the best course for family harmony. I would prefer to try and get my father’s buy-in in the next two years before making the authoritative decision. But man, it is frustrating to talk to him about this.
2) Getting my dividend portfolio up to snuff. I am now averaging only a dividend yield of 2.5% due to some non-performers.
3) Making sure I keep up the income and savings rate for the next ten years. The rental HDB will depend on the condo sale, but my forever home, the private studio apartment will need a cash injection of about $800K. That means saving $80K a year including CPF. I think I can swing that…barely…
So, there it is, my retirement plan in all its glory. Even if I cannot retire fully at 45, I see no reason why I should not be able to downshift to work that I enjoy by that time. Like shelving books in a library, or becoming an admin clerk, or becoming a PI’s assistant…
Choices…the best part of financial independence…mmmmmm…..