RETIREMENT

this is not an economic update. for young recipients, you may not be interested.

many of my friends ask me how much is enough to retire, what age to retire, what portfolio to carry?

since we all live different lifestyles, it is hard to give a meaningful estimate for all.

i summarize below my views on retirement planning.

reality check

first of all, you must not be renting a place to live unless you have a matching residence or properties that generate similar income if not more.

estimate your monthly expenses [property related and personal], x12 to become annual expenses, then x20 is the size of your portfolio. e.g. if you need 10k a month, then your retirement portfolio must be about 2.4M. this assumes your portfolio generates a 5% return p.a. if your country taxes the income generated from your portfolio, the 10k is then the net disposable income not gross income.

estimating your expenses is tricky:

property related - rates, government rent [taxes], management fee, repairs, utilities etc.

personal - food costs, entertainment [hobbies, eating out, massage], travelling [local and overseas], others [wedding/birthday gifts, clothing].

you may want to mark the total up 10% for margin of error.

portfolio

stocks, bonds, property and cash.

what percentage allocation to each category? a balance portfolio would be 30% each with 10% cash.

if you are overweight in property that generates income monthly, you need less cash and bonds.

stocks should mostly be in utilities and energy related sector.

spending habits

as with most families before retirement, after the mortgage is paid and with two income, eating out a lot and spending freely become a habit. purchases of unnecessary [limited usage or luxury] items usually takes up a lot of the budget when you are still employed.

you must learn to live within your means in your retirement after on a high pay for such a long time. if you cut unneeded purchases and meals in restaurants down to the minimum, your monthly expense need would then be drastically cut.

many of the healthy habits of living do not require a lot of spending such as trail walking or visiting the gym a few times a week. when you spend time on low cost hobbies, you have less time for high cost ones too.

age

a friend who retired at 60 told me that if you can afford it, retire early since he said after reaching his present age of 68, he found that he does not have the vitality he had at 60 and he does not enjoy as much now on food and travel.

well, maybe you feel young at 70, who knows. just some more info to help you decide.