Asked on 09 Jul 2020
I'm a self-employed who does not voluntary contribute to CPF scheme such that i might missed out my CPF Life next time as well. On my part, i'm investing in the US Stocks market.
But i would like to know what's a good Compounded annual growth rate (CAGR) that i should be targeting so that i can be better off the CPF life scheme or to retire by 50.
I'm currently 29 this year.
You can use the above calculator to project your wealth and income cashflow.
S&P500 long run - 7%
Entire portfolio realistic return - Between 4-6%.
The above takes into consideration conservative funds. It exludes investments which are speculative with high return potential.
The answer is given in this text:
For total portfolio performance, including mistakes done, fees and secular shifts,
my feeling is that around 4-5% per year are more realistic than the SP500 very longterm CAGR of 6-7%.
Based on the factors you have given, age 29, looking to retire at 50 there is still one question missing.
How much do you want at retirement?
Based on the hypothetical scenario of $5000/month, $60k annually, with a 21 year horizon. Firstly if we are solely relying on investments that pay you a fixed income/dividend, the capital sum you are looking at is around $1.2m.
To reach this number, based on today being Day 0, you would need to invest at least 12k yearly, for the next 21 years, with a CAGR of 13.63%. You will need to focus heavily on growth on your next 10-15 years, following which you can start to move into a dividend portfolio for yourself.
Its a tall number, but the more you save currently, or the income you want at retirement will help shape your strategy in your coming years!