Did an earlier post on fatFIRE that was decently fast and fun.
However, the below is probably closer to the reality for most early retirees in Singapore and I doubt I can go below this line without descending into misery.
Let us take a look at how lean we can get in terms of retiring in Singapore and the accompanying portfolio size needed.
Accommodation ($1,500)
I send my son to early intervention classes at Fernvale three times a week and have grown familiar with the area. Fernvale Hawker centre is very well ventilated and you can get 80 cents Kopi O Kosong as well. There is also Seletar Mall with a big Fairprice supermarket in the vicinity.
So if I were to downgrade, that is a region that I might seriously consider. A nicer 3-room flat with >80 years of lease costs around $500k-$550k. If you are the kind that prefers to make day trips to JB, Woodlands or Bukit Panjang will be good alternatives. Half a million buckeroos can get you a nice 3-room flat there as well.
For a 3-pax family, 68sq metres will be cosy but for >4 pax, might be a tad squeezy but not Tokyo tiny apartment level yet, I suppose.
Owning instead of renting also makes much more financial sense for HDB flats, so I have assumed a $170k downpayment (CPF OA and grants should easily cover) and a $330k HDB loan at 2.6%.
Fact: If you ever want to retire off a portfolio, you have to know how to overcome a 2.6% hurdle rate.
The mortgage will be $1498 for a 25 year loan based on the CPF calculator.
Food ($900)
$30 a day for 3 pax can go quite far……. if you cook most of the time. And if somebody in the household practises intermittent fasting. But for this exercise’s sake, let us assume 90 meals in a month.
Default breakfast can be 4 eggs and 2 fruits/slices of bread for a family of 3. Maybe occasional meals out at hawker or Ya Kun. Groceries ($50) and eating out ($100) means this should easily be the cheapest meal of the day at $150 a month.
Lunch and dinner will involve staples like rice, chicken, pork and vegetables. A veg, a meat and soup should make for a decent meal. Bonus dish occasionally will involve seafood like prawns and fish. 2 trips to the wet market ($100 each) and 4 trips to the supermarket ($50 each) should suffice for the month.
If we cook for 50 meals, that means 10 meals dining out. WIth a $300 budget left, maybe 8 meals at hawker centres/fast food/food courts and 2 visits to a restaurant. Obviously, the money can stretch even further across the causeway.
If you are horrified at the above, I actually think this is how the typical Singaporean household behaved about 2 or 3 decades ago. At least my Primary School peers and I grew up in that environment.
Childcare ($400)
Since both parents are retired, no need to send to childcare?
But who am I kidding? Maybe the Mrs will have to work at least part-time to qualify for childcare subsidies. Doubtful that “no income” will qualify for heavier subsidies under the current policies.
Travel ($400)
$5k a year can obviously cover many runs across the causeway. A family of 3 might even be able to squeeze in one or even two short trips to places like Penang, Phuket, Bangkok or Hanoi.
Insurance ($400)
Need to be more selective to ensure premiums do not exceed $5k a year. The usual H&S and maybe even some CI add-ons. Currently, we do not spend more than $4k a year on insurance.
Utilities ($300)
Electricity and water bills should be very manageable for 3-room flats, with the heavy subsidies from the government. Can definitely afford the aircon.
There is probably recurring broadband and handphone expenses as well for two.
Transport ($300)
$10 a day for 2 pax since the toddler can travel on public transport for free. If $10 a day is not enough, can consider getting the travel concession pass for $128 a month.
Others ($800)
I inflated this by quite a bit to cater for each individual’s idiosyncrasies and special circumstances. For my household, it would be a gym pass for me and additional expenses for the little one. For others it could be shopping, gifting or other miscellaneous expenses. Or even savings. Can’t break the habit, right?
Total ($5000)
So in total, the expenses add up to $5k a month and $60k a year. Working backwards using the 4% rule, the portfolio size needed would be $60k x 25 = $1.5 million.
However, if we strip away the mortgage for those who are lucky enough to be mortgage free, the expenses will become $3.5k a month and $42k a year. The portfolio size will then reduce to $1.05 million using the 4% withdrawal rule.
A couple that can save $80k a year and achieve good returns in their investment can actually reach this target in about a decade.
Conclusion
Most people will reject the lifestyle painted above. They would rather continue working than retire early and lead a “miserable” life.
But I guess the big question is whether $1.5 million is life-changing money. I personally think so since it can theoretically buy you freedom and time. Even at a more conservative 3% withdrawal rate, it can afford you $3500 of expenses every month.
Whether you have $6 million or $1.5 million, you get the same enjoyment when you enjoy the sea breeze by the beach on a weekday morning. So a $6 million retirement fund does not provide 4x the utility of a $1.5 million portfolio.
At the very minimum on the lower end, you have the option of a poor man’s aristocratic lifestyle. Not sure about you, but that is some comfort for me.
