Retire 55 or 60 ?

Now even the star has written article to support the idea to postpone retirement age from 55 to 60.  It brought up a few points that seem inevitable but . . .

Easy Retirement

This is an extract of what I read in today's newspaper. More and more people start to carry this type of alternative concepts about retirement especially in this 21st century. You can't say its wrong. As a matter of fact, its a rather SMART way to go. But lie within is a huge hidden risk.

Different types of retirements

There are many ways to retire. Some are easier than others. And some still think there is no way they can retire at all :)

There are 2 main factors in retirement;

1. IN : how much do you have and

2. OUT : how much will you use during your retirement

So naturally if you have more IN than OUT then you can retire.

One of the ways is to calculate how much your OUT would be and then accumulate IN as fast as possible. You may have read that its rather simple for a single woman to retire at young age.

There are 2 main influence on the figure OUT;

1. if you live a luxury life, it may take longer to retire ... if ever ...

2. if you live frugally, you may retire sooner.

Some may think they live frugally but actually they may have been spending more than they should. A good way to quantify your OUT is to look at how you have been expensing for the past 10 years. It would most likely be how you will spend in future. The way we use our money is deeply embed in our subconscious. Its easier to discover it than to change it.

Once you have figured out how much you need to retire, you can work on the IN part. There are 2 ways to accumulate your IN;

1. Lump sum : save as much as possible until you reach the same amount as OUT, then retire.

2. Passive income : find a way to consistently receive your IN in smaller amount but continuously without doing much.

Now the key of successful retirement is you will need BOTH ways to accumulate your IN. Simply put, keep your day time job and start learning and building your passive income at the same time.

Problems come when some focus only on one Lump Sum to achieve retirement but a sudden expense surge in future may kick them out of their retirement. Some others only aim at luxury goals by only pursuing passive incomes neglecting the use of Lump Sum Saving method as a backup plan.

Best Retire Young ? How possible is it ?

Is it best retire young? Have you ever heard some people retire early at their 30s ? Do you think they got lucky or they must have own some businesses to become rich before they can retire ? Here are the stories of 2 persons who retired at their mid 30s and they only have worked for other people before.

( due to consent issues, the figures are generalized just to illustrate the concept )

They started working at their early 20s with starting salaries of $1,800 to $2,000. After more than 8 years of working, their monthly income were more than $6,000 and then it didn't increase any much further after that. Usually the salary big jump occurred during career move and they have changed career once or twice. Together with bonuses, they have earned a total of $800,000 in total after 12-15 years of working.

Through out those time, they have saved aside a total of $175,000. Initially they save their money in fix deposit getting about 2-3% return but very soon they move on the mutual fund and stock market. Over the years, their average return is 6.3%. So when they retire, their savings are more than $260,000.

Their monthly expenses is about $1,000 and their personal inflation rate for their life style is 2.8%. So with this saving alone, it can last them until age 75.

They also have an EPF ( like 401K ) that is more than $100,000 at their mid 30s. When they can withdraw it at their 55, they should get at least $200,000. With this, they will still have a $500,000 balance when they are 100 years old. Of course they don't plan to live that long but this is their surplus money.

At the time they retired, they also have a home and a vehicle that are already fully paid off. The property was worth $100,000. They ended up paying about $120,000 for it with their 10 years loan. Conservatively this property is expected to worth more than $200,000 when they are 60 years old, just in case and in time for them to enter old folks home where care and friends are around.

The first few years they retired, they literary sit around doing nothing. But very soon they got bored and started interacting with they industry they are used to. From time to time, they provide freelance consultancy to their friends and earn some extra income too, ie. $10,000 to $20,000 a year sometimes. With these incidental incomes, it pushes their 100-year-old left over to $3 millions !!

They may have lived frugally all along but they are enjoying life the luxury way more often now. They don't run any business, they didn't get any lucky in their investments but they must have been good at their jobs because someone actually paid for their services after they retired. But then again, a $10,000 yearly consultancy fee doesn't sound like a real consultancy at all, its more like a very small incidental assistance in one small project only. On the other hand, a $6,000 salary employee is a good employee but its no where near CxO positions neither. So there can be many good employees, this is not one of those only-one-man-scenario.

Some of the keys to their early retirement would be;

• Save First
• Live frugally first
• learn to invest
• bought a motorcycle - just to get around
• bought a small apartment - just enough for him and his visiting friends

There is really no trick here. If there has to be one, they are singles. Some of them may be married but with no dependencies, meaning no need to take care of parent and no kids.

It is really not that hard to retire young.

One last key difference between young retirees and others, their hobbies do not cost them money. As a matter of fact, some other young retirees actually make their hobbies their life time businesses after they retired.