A Simple Plan

The calculation was simple, let say you got 10k to invest, and expect only a 6% yearly return.

Yr 1: 10,000 x 6% = 10,600
Yr 2: 10,600 x 6% = 11,236
Yr 3: 11,236 x 6% = 11,910
.
.
.
Yr 20: 30,256 x 6% = 32,071

That is provided you are not injecting anymore fund over the year. If you are injecting lets say 1k every year.

Yr 1: 10,000 x 6% = 10,600
Yr 2: (10,600+1,000) x 6% = 12,296
Yr 3: (12,236+1,000) x 6% = 14,093
.
.
.
Yr 20: (64015+1,000) x 6% = 67,856

The tools has always been there, the trick is to start early.

How much is enough?

So I asked myself, how much I did to get every month to make sure I enjoy the same lifestyle even after I completely stopped working? Is that even possible in today's living standard?

The friend that asked me the questions, is a finance advisor, and am I glad to know one that I could really trust all my money with.

I give it about 5 mins of thoughts and told him I need SGD 5000 a month to be really comfortable about my retirement at the age of 60. Note that I don't even earn that much now.

After punching a few figures into his laptop, taking into account the risk and depreciation factor, he gave me an amount that I should have in my investment fund which will generate a 6% interest (low risk) yearly to cover my expenses. The figure was 2.3 millions. Yah right! How in the World am I gonna get that kind of money?

Thinking of the future

I wished someone had asked me this question 10 years ago: "How do you plan to retire?" Then again knowing it now in my 30s may not be too late.

This question had set me thinking what kind of income would I be getting to keep my current life-style (even improve?) if I don't work anymore. Hello? No work? Income? Maintain or even improve current life-style? Get outta here!

Really, I don't have super pension scheme like my Dad has decades ago. I wont benefit from any insurance as they need me to be in some kind of trouble before they would hand over the money to me. So how do I get it in place to have all these in time of my retirement? Early too I hope!

Back to the question, I was asked by a very close friend who make me get a financial plan done up to ensure I get what I want by the time I decide enough is enough. That is, more income, not more debt.