Wednesday, August 7, 2019

Early Retirement Through Finding Work That You Enjoy Doing

How many times have you heard people complaining about their work? I'm sure almost on a daily basis be it your family members, your friends, your colleagues and maybe even your boss complains about work to you.

This is why early retirement and financial freedom is so popular. In Singapore, we probably need about $1 Million to retire comfortably. But the bad news is its extremely hard to save this amount of money in a very short time.

In my previous post, I introduced the 30 years retirement grid:

In this grid, it shows how much we need to save and invest to achieve whichever amount we desire for retirement. I figured out we need to save consistently $1500 every month and invest at 4% return for 30 years to achieve $1 Million. 30 years is honestly too long a time if you hate your job every single day. This is 10,950 days of your life!

You can read more about the 30 years retirement grid here.

Introducing the 10 years early retirement grid

In this case, can we achieve retirement in 10 years instead just to get out of the rat race? Let me introduce you the 10 years early retirement grid.

Sadly, you would realise that it is extremely difficult to achieve a desired sum of money for retirement in 10 years even if we invest at 8% return. We need to save $6000 per month to get $1 Million dollars, which will definitely lead to a poor quality of life (unless your income is extremely high). For most of us, even saving 100% of our salary will not lead us to retirement in 10 years.

Introducing the sustainable way to early retirement

The truth is, we don't need to save till we drop to achieve early retirement. Most of us think of retirement as quitting our jobs completely. This shouldn't be the case for early retirement as I can guarantee you that you'll be too bored in a short while.

A financial blogger, Zack from four pillar freedom, who's based in the US, recently quit his job and achieved early retirement before his 30s. Now, he focus his time on his blog which generates a decent $3K plus per month. He mentioned work feels like play for him now which is early retirement to him.

While in SG it may be different for us, I'm sure we can also find something we like to do and still create some sustainable income. It is never an easy journey as income outside of work also takes time to build. The key is doing what we like to do.

Building income outside of work requires times and effort. We need to create value to generate sustainable income. Some ways to create sustainable income outside of work are:
  • Start an online blog writing content which you like
  • Investing in good dividend stocks
  • Providing consultancy services on your expertise areas
  • Providing professional services such as playing musical instruments, singing or doing emcee for events
  • Start a part time business
  • Providing freelance service such as website programming, content writing, design etc
You can see in our world today, there are endless opportunities to create income outside of work. Everyone can do it. 

If creating income outside of work is too tough, we can also find work which is more meaningful and let us feel more fulfilled. Since we are spending so much time at work, it is quite important that we do not work in a job we hate. While we can't totally like our jobs and there will always be conflict, we can at least find some work which we like a bit more. Its just like relationships where there will always be conflicts but we resolve it and get stronger.

Rethinking retirement

If we create income outside of work which we enjoy doing and the income can sustain our monthly expenses, then we have achieved early retirement.

If we work in a job we enjoy and feel fulfilled then perhaps thinking of quitting work totally for retirement is not so critical anymore. If we have enough money, we can even consider slowing down by taking on part time or freelance roles instead of totally quitting.

The end goal is that we feel more fulfilled in life and able to spend time on the things that matter to us more. If you're stressed up having to plan for retirement, perhaps its time to rethink how each of us see retirement in life. Perhaps its time to lead a more purposeful life, creating value and doing more meaningful work in our lives.

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  1. It is not the job. It is their workload that many hate it!

    1. Hi Uncle CW,

      That's true. Because of no freedom of time having to stuck in office and clearing the work which is never ending.

      That's why if we enjoy the work then maybe it feels better.

  2. People generally know the math of compounding interests. What people are looking for is the "how", ie how to achieve the compounding interest (for eg 5% pa) on a consistent basis, over 20 years, 30 years etc...

    What you have presented so far, are just the math. Knowledge of the math, theories does not mean anything if it cannot be translated into actionable plans / steps that people can execute to achieve the results.

    Among the various investments (equities, property and CPF) that I have, only the CPF provides some semblance of a consistent return. Even then, the CPF interest rates were changed (lowered) a few times over the years and I have lived through those periods.

    The dividends I received from my equity holdings vary year to year. I cannot plan on it being the same or grow each year! Last year it was $65,000, this year? I am not sure.

    Likewise for my rental income, I cannot confidently plan on receiving the same amount year after year. If I couldnt sign on a tenant, there is no rental income straight away.

    As you can see, on paper it is easy to project how much your wealth will grow with various ROI, but it is a different story in real life. And when it comes to investment, you might even see your wealth diminish in a bad market!!

    As mentioned earlier, only the CPF is able to provide consistent returns, albeit at only 2.5% for the OA, and 4 to 6% for the other accounts (MA, SA and RA).

    So to ensure that we have consistent cashflow in our retirement, what we did was to channel some our dividends and rental income into our CPF regularly.

    This is the cashflow we planned (theory) to support our retirement (as a couple):

    Age: 62 to 64

    Dividend: $65,000 pa (confidence level - 75%)
    Rental : $36,000 pa (confidence level - 75%)
    OA & SA interest : $50,000 pa (confidence level - 99%)
    SRS drawdown : $30,000 pa (confidence level - 100%)

    Total annual projected cashflow : $181,000

    Age 65 to 71

    Dividend: $65,000 pa (confidence level - 75%)
    Rental : $36,000 pa (confidence level - 75%)
    OA & SA interest : $50,000 pa (confidence level - 99%)
    SRS drawdown : $30,000 pa (confidence level - 100%)
    CPF Life payout : $40,000 (confidence level - 99.5%)

    Total annual projected cashflow : $221,000

    Age : from 72 onwards

    Dividend: $65,000 pa (confidence level - 75%)
    Rental : $36,000 pa (confidence level - 75%)
    OA & SA interest : $50,000 pa (confidence level - 99%)
    CPF Life : $40,000 pa (confidence level- 99.5%)

    Total annual cashflow : $191,000

    As you can see, it is easy to plan and nice to look at. The real challenge is to make the plan a reality.

    Our passive income last year managed to hit $180,000. This year, we are not certain.

    1. Thank you for your sharing! Yes indeed a plan is just a plan and sometimes what happens in real life will be different. Even when we are still working, we also can't be certain if we still have a job or will be retrenched. In times like this nothing is certain anymore.

      We also have to take into consideration that life may throw us some shit along the way such as sickness of ourselves or family members. This we have to adjust accordingly.

      While nothing is certain, having a plan lets us get back on track when the dust has settled after going through tribulations. The plan will also have to be adjusted time and time again along the way. Some may reach faster while some slower in their goals.