Retirement Budget and Plans

Previously I made mention of how I intend to approach my (semi-) retirement at 45. Here are my projected retirement expenses again, close up:

PL3

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…..

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5 comments on “Retirement Budget and Plans

  1. My 15 HWW says:

    Hi Miss JJ,

    You seem to be in a much better mood in this post. Ah, the joys of talking about early semi-retirement/retirement. =)

    If I didn’t interpret wrongly, guess your plan is to trade the condo that you have for a 4 room HDB flat and a studio apartment. The flat for rental income and the latter for your own occupancy?

    This appears to be a good move since HDB flats (with their lower rentals) are easier to rent out compared to condos and you’re right that the yield is higher.

    But there are other options too. If the amount of capital injection is a concern, why not a 3-room flat since the yield is likely to be even higher? I understand the absolute income would be lower but perhaps you might not need so much if you continue to stay with your parents. Not sure if it’s favourable, but it’s actually more efficient for you to stay with your parents instead of getting a studio apartment and them renting out a room (they might not entertain the idea of being under a roof with strangers?)

    Am not sure how much the studio apartment would cost, but I doubt it’s cheap or value for money? I mgiht be wrong. So another possibility is to just buy a 3-room flat to stay in and invest the rest in securities? Have to admit there’s less diversification though.

    Interestingly, I also seriously thought about shelving books in libraries or working in Kinokuniya after achieving semi-retirement. I doubt that is a usual person’s dream job. LOL.

    All The Best,
    My 15HWW

  2. Miss JJ says:

    Hi, 15HWW,

    You are right on the joys of discussing retirement. The high I got from writing this post carried me for quite a while. However, being an impatient person, I want to get it done NOW. Just hoarding money and waiting is frustrating me.

    Just some clarifications on your queries:

    1) I wanted to move out prior to achieving retirement because I do foresee some conflict with parents if I follow my plan. My father and I…well…there is fodder there for another post and more. Moving out will give us some buffer, what they can’t see, they can’t complain and nag right? And well, I am selfish enough to want to experience some life/freedom on my own. Having the excuse that I need to live in my HDB flat for 5 years prior to subletting it whole is just what I need to convince them…

    2) The 5 years living in a HDB with room-mates will let me know if I can “tahan” living with strangers for the rest of my life, or if I am really happier living alone, albeit at a higher financial cost. Or maybe at the end of 5 years, I might find that living with family is still the best and move home. Or maybe, I’ll have no choice and have to move home anyway to take care of ailing parents. Hence, my living in the private studio is not carved in stone. I will have 5 years to decide.

    3) In case I am happy to live with room-mates and not get a second property, subletting two rooms in a HDB will actually cover my living costs if I live there. Hence the need for a 4 room flat, I also think a 4 room flat is the most flexible in terms of rental. The number of bedrooms is pretty critical in a rental, in my opinion, whether subletting individual rooms or whole flats. It’s not that much money to pay over a 3-room when you consider the increased flexibility. And a 5-room or EA will command the same rent as a 4 room due to having the same number of bedrooms at higher cost – lower yield. I have looked into this and decided that the 4 room flat is the best value for money. The amount of capital injection for the HDB is not the concern. I have more than enough for that even if the condo appreciation goes away.

    4) I have not rejected the idea of just getting the HDB and putting the rest in securities. It all depends on the kind of living arrangement that I am comfortable with as per above. But I do confess a certain preference for rental properties over securities, especially in Singapore. Maybe because I have been lucky so far, and my tenant is really easy going, but my rental experience has been 99% passive so far. It gets even easier if you have a trusted contractor/handyman. That said, I will be injecting more capital into my stock portfolio and I have been doing a bit of reading here and there, and hope I will get better at it.

    So there’s the long clarification – a blog post itself in the comments. Thanks for reading and commenting!

  3. My 15 HWW says:

    Hi Miss JJ,

    Thanks for your extensive clarifications. I guess I get it and it really does make more sense to get a 4-room flat after you are able to sell the condo without any additional penalties.

    Regarding the waiting part, I am also impatient just like you. But have you thought about the trade-offs if you wanted to cut the waiting time to 5 years or less? Otherwise, maybe it’s time to change to a job that’s giving you less stress so that you can continue accumulating, but maybe at a slower pace.

    Sharing a link with you that I found to be very useful in this “wanting to retire early” situation:

    http://renewablewealth.com/articles/so-you-want-to-retire/

  4. Ben says:

    It is not a bad idea to change to a job that gives less stress. No doubt, the remuneration is likely to be less. It will be beneficial if one feels happy and fulfilled in this new job. In fact, one can consider to be retired if the passive income can cover the living expense without the need to worry about the loss of this less stressful job.

    Ben

  5. wow condo and a dividend portfolio. singles nowadays are damn rich. its good you aim for a low portfolio yield

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