29 May 2015

Light the FIRE! Can I Retire Now?

This was the first time I came across the term: FIRE (by Googirl). Or to elaborate, that's Financial Independence, Retire Early.

Quite a catchy tag line. Achieving the left gives the option to exercise the right.

I view Financial Independence as the situation when my passive income can support a desired lifestyle.

For me, it works out to be an investment portfolio of $2.5m if before age 65, or $1.8m if at statutory retirement age of 65. The reason for that difference is the additional payout from CPF Life payout by then, and because parts of my current investments are using CPF funds and Supplementary Retirement Scheme (SRS) that are locked up till age 55 (the excess beyond the minimum sum from CPF Retirement Account can be withdrawn) and statutory retirement age respectively.

Alternatively, if I strip away these, I could likewise retire on a portfolio of $1.8m anytime if they were all using fluid cash based investments. Why $1.8m? Because at a 4% dividend/coupon payout or withdrawal rate, a $1.8m portfolio would give me $72,000 per year. That's $6,000 a month. I think it's enough for my wife and I.

Howzabout $1.8m in bonds from Bonds@FSM (see Bondsupermart)? That's like 6 blocks of bonds at about $250,000 each. A bit too much for me to stomach for now. I prefer wider diversification at this accumulation stage. But it is certainly one way.

If I were nearer retirement age, it might still prove to be attractive. A yield-to-maturity of about 4% seems achievable based on the various Singapore corporate bonds presently available.

A search on Bonds@FSM based on a yield-to-maturity above 4% with a time span of above 10 years threw up 17 options. Most are familiar names from the Singapore Stock Exchange. Many of these had yield-to-maturity in the region of 5% to 7%. Obviously, there are higher risks for the higher yield end of the scale (e.g. Olam and Hyflux). And interestingly, all are "perpetuals".

Another way of thinking about above is that every $300,000 worth of bonds at 4% yield would generate $1,000 of income per month.

What's your magic number?

The Good News About Retirement


la papillion said...

Hi lizardo,

Due to the nature of my job, I can have a small fire instead of one big fire at the end. Let me explain. I can take as many students as I want each yr and that will affect my income and savings and so on. So I decided that if I have x passive income then I can choose to work lesser hours. I don't have to seek a big fire at the end. If ive a passive income of $1k, I can choose not to work for 1 or 2 days per week (currently I'm doing 7 days work week, though not full day). I don't have my job, just don't like the intensity of it.

So how to get 1k per month passive income? I think it's about 240k to 300k capital. Let me reach there first then I can tell u more about a bigger fire lol!

Lizardo said...


That's one way to stage a gradual progression. Glad you have such an option to scale down. Interesting.

Looks like you're banking on 3-4% yield.