|JUST ASK: “Can my wife & I retire at 50 with $2-3 million?”||
|In this weekly series titled JUST ASK, we invite readers to send in questions on stock investing, and personal finance. We will ask an expert (or experts) to provide answers. Below is a question from a reader which is answered by Leong Sze Hian, President of the Society of Financial Service Professionals, and Musicwhiz, a popular blogger on financial and investment topics.
How much to save for $2-3 m by age 50?
Reader: I am a graduate in my mid-30s, and earn about $5,000 a month. My wife is of the same age, a graduate and also earning the same income.We don’t have children and we live in a HDB flat, don’t own a car, and are conservative in our lifestyle.
We hardly invest in stocks, and accumulate savings in the bank’s fixed deposit accounts.We hope to retire at 50 on savings of $2-3 million. We believe we can based on some back-of-the-envelope calculations that we have done. We don’t plan to stop working completely after 50, but will work two or three days a week. Is it possble to achieve $2-3 million by 50? Is this enough to last us for the rest of our lives?
Leong Sze Hian
Dear Reader: Let’s assume that you are:
* aged 35,
Under the above assumptions, the capital you require at age 50 is $1,913,304, assuming your savings can achieve a 6% rate of return a year along the way.
If I assume that you have $300,000 of assets now (CPF + cash), you will need to save $4,027 monthly from now to age 50.
As the assumption is a 6% rate of return, you may have to consider investing your cash and CPF – after setting aside about 6 months of your expenses in cash, and the first $50,000 of your CPF OA/SA that cannot be invested.
If you plan to work for 2 or 3 days a week when you retire, the amount you need to save may be less, as the inflation-adjusted equivalent of $6,000 today is $8,075 in 15 years’ time