Marksman's Investment Corner is returning soon!

Marksman's Investment Corner is currently on a short break - expect activities to pick up from July 2018 onwards!

Update 01-09-2018: Looks like my break took more time than expected... Things has been pretty busy over the last few months on a personal front, but are slowly settling down and I can look to get a bit more posting done on Marksman's Investment Corner once again. :)

Saturday, April 7, 2018

What will it take to retire at the age of...

I believe for a lot of us, we have a goal to plan for our retirement, or even achieve FIRE at some point in life. A starting point to decide the amount of wealth is to base it off:
  • Amount of wealth to accumulate
  • Drawdown amount/rate (that is, how much are you drawing to live off the accumulated wealth)
  • Our life expectancy (as morbid as it sounds)
The typical drawdown rate seems to be based off 3-4% drawdown annually. This brings us to being able to live on this sum for 25 years - 33 years, not taking into account inflation or unexpected spending.



I'll explore the wealth to be accumulated for retirement based off:
  • Drawdown amount of $12,000 annually.
  • Effective drawdown amount (at 3% inflation) equivalent to $12,000 annual drawdown.
In Singapore, the typical retirement age is 65. So shall we see how much wealth to accumulate (per person) to survive our golden years? For the sake of us who is hopeful in living past 100, I have included the age of 105 and 110.


Live Till Age of
Drawdown rate
Wealth to Accumulate
No inflation
Include 3% inflation
80
6.67%
180000
280434.13
85
5.00%
240000
433466.70
90
4.00%
300000
628133.38
95
3.33%
360000
873814.49
100
2.86%
420000
1181822.23
105
2.50%
480000
1565778.14
110
2.22%
540000
2042061.75

Without inflation considered, the amount you need to accumulate seems quite achievable doesn't it? But once you factor inflation in - for those of us expecting to live older, that becomes quite an incredible sum!

If one was intending to retire by 45 by accumulating wealth then live off this sum:


Live Till Age of
Drawdown rate
Wealth to Accumulate
No inflation
Include 3% inflation
80
2.86%
420000
1181822.23
85
2.50%
480000
1565778.14
90
2.22%
540000
2042061.75
95
2.00%
600000
2630343.61
100
1.82%
660000
3354218.07
105
1.67%
720000
4241954.23
110
1.54%
780000
5327386.53

Now... what if one were to aim for retirement as early as the age of 35?

Live Till Age of
Drawdown rate
Wealth to Accumulate
No inflation
Include 3% inflation
80
2.22%
540000
2042061.75
85
2.00%
600000
2630343.61
90
1.82%
660000
3354218.07
95
1.67%
720000
4241954.23
100
1.54%
780000
5327386.53
105
1.43%
840000
6650970.41
110
1.33%
900000
8261033.10
Have your eyes popped out looking at the sum if you were to live past 100?

When planning your retirement, however, there are contingencies that need to be considered for these scenarios:
  • Life expectancy - If you outlived your accumulated wealth
  • Emergencies requiring a sudden larger drawdown to be withdrawn
  • Your expected standards of living - This directly influences your wealth to be accumulated and the drawdown amount. If you plan to live a simple minimalistic life post-retirement, then you do not need to accumulate as much. Consequently, if you plan to live a luxurious life, then you need to accumulate a larger amount.
 Have you started on planning out your retirement?

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