Asked on 10 Apr 2019
I'll be retiring at 55 years old this year and I'll be getting about $300,000 from my services with the organization. I intend to continue to work for another 5 years, i.e. when I'll be 60 yo. I have a private housing loan balance of about $500,000 which will end when I'm 65 years. I have met my FRS from my SA and have about $250,000 in my OA balance.
Amazing stuff! Retiring at 55 is no small feat.
Before we get into the numbers, do note that you can be retiring for 30 to 40+ years. This would have been the total number of years you were employed.
Crisis can happen even if we try the best to plan in anticipation of them. So please make sure you have medical insurance in place, Advance Medical Directive, and Wills and nominations set up and documented.
Document and budget as well as you can all your incoming sources of income during your retirement years, your fixed and variable expenses, assets, and also sources of emergency income and lumpsums if needed which could come from the sale of some assets again only in a major crisis.
For your sources of income, make sure you also know which ones are guaranteed (annuities from CPF Life and any private ones you may have, bond coupons), and variable (rental from property, dividends from equity investments). Make sure that the guaranteed sources of income can at least cover your basic retirement needs and a little bit more.
Some of your assets still need to grow to adjust for inflation so keep track of your net asset expected rate of return to continuously beat inflation at least.
For your expenses, do note that during your active retirement years (55-75) you'll most likely still be ticking off items from your bucket list, and you would most likely spend a lot more during this time as compared to your passive retirement years (75-95). If you consume your assets too quickly during the first 20 years, there may not be enough to grow and cover the last 20 years. Do remember that CPF Life also only starts at 65 but the basic and standard plans do not adjust for inflation. So quite quickly, it may not be enough for your most basic needs during your passive years.
But most importantly, enjoy yourself. This is the time you have been waiting for. All the effort and sacrifices you've made and now it's time to pamper and spoil yourself. Please also do spread your wisdom to help others retire earlier than their peers as well.
Have a wonderful retirement!