F.I.R.E. – anyone?

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James Foong asked 4 years ago

Hi, my name is James from Penang.
I am working as a seafarer for the past 15 years in the maritime industry and spent less than 182 days a year in Malaysia as a non-tax non-resident status.
QUESTION 1: is my retirement fund sufficient or daydreaming?
I am currently 34 years and planning to retire at age 45 with 1 million USD liquid savings.
The 1 million USD liquid savings is taking into consideration having the current value of RM 10,000 monthly living expenses which are subject to inflation as well (I am looking at 8% per annum.)
Looking at my family history life span of my late grandpa who passed on at age 80. I foresee I could live around that age, PLUS an additional of 5 years if living with better health supplements now, which is 85, so that makes me living retirement years of 40 years from age 45 to 85 of having RM 10,000 monthly living expenses of today value subject to 8% inflation rate – I am not sure if 1 million USD liquid savings is sufficient or not.

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QUESTION 2: Investment options
I have an additional of RM 300,000 cash from my active+passive income per annum after minus all the other living necessities/expenses – what are the investment options that I can invest in and how much return would I be needed in order to achieve my retirement goal in 11 years time at age 45 with 1 million USD liquid savings. (lets say now only have 50k USD liquids saving)

Thank you for your time

James

1 Answers

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ERIKA Staff answered 4 years ago

Welcome to AskCF James.

Your Q1 can be broken into 2 parts - accumulation stage (now until age 45) and decumulation stage (45 until 85).
In the first stage, you need to take in your surplus (income minus expenses) and see if total surpluses (factoring in expenses inflation and pay increment) can hit USD 1 mil or not in the next 10 years.
In the second stage, you need to simulate a drawdown of your USD 1 mil, and see if it can last 40 years (factoring in expenses inflation and any anticipated high lump sum spending).
This will give you a clear roadmap to follow, and able to track if you are on-track or off-track when you review your plan every year.
The above assumes you put your money only in fixed deposits, risk free. Of course, in most cases, you may not hit your USD 1 mil goals, which means it is highly probably you run out of money before age 85.

That is where the answers to your Q2 comes in. What kind of investment portfolio that can deliver the most optimum annual growth rate without exposing your money to the risk of losing too much money when the market tanks. Ideally, you may say - "highest return with lowest risk" but that is not realistic, that is like wanting a race car to go 200 km/h but it will be as safe as a normal car that is being driven at 40 km/h when it crashes. Your investment portfolio - usually it is a combination of a few investment vehicles that can meet or exceed the optimum annual growth rate you want.