Have you read the book "Quit Like a Millionaire" by Kristy Shen and Bryce Leong yet? They offer a pretty compelling approach to achieve FIRE.
Their broad FIRE strategy is as follows:
- Have a global medical insurance policy in place.
- Determine investment portfolio needed - i.e. Annual_Expenses x 25.
- Invest in low-expense Exchange Traded Funds (ETF) that track indices for a balanced equity-bond portfolio.
- Weigh it more heavily with higher-yielding ETFs for the initial 5 years to reduce the negative impact of retiring in a downturn market - i.e. mitigate against sequence-of-return risk.
- Perpetually withdraw at a 4% rate per year during retirement.
- Income yielding portfolio provides a Yield Shield - i.e. even if the market tanks, there is still distribution.
- Create a Cash Cushion to cover the shortfall in those bad years. Bad years typically did not last beyond two years before the market recovers to previous levels. 5 years is however assumed as a margin of safety. Cash_Cushion = (Annual_Expenses - Annual_Yield) x 5. In good years, use any surplus to top up the Cash Cushion.
Steps 5 (Yield Shield) and 6 (Cash Cushion) are part of the mitigation strategies against bear markets. Additional options include:
- Geographical Arbitrage. Live in lower cost-of-living countries till market recovers!
- Side Hustle. Create alternate streams of income.
- Part-Time Work. This needs no explanation.
There's a fair bit of treatment on dealing with taxes due to Canadian and US laws. But taxation in Singapore is much easier without the capital gains tax to worry about. And prevailing tax avoidance means of SRS and CPF schemes are much simpler to understand.
--
Based on this strategy, they retired with a $1,000,000 portfolio for a lifestyle that requires $40,000 a year. It turns out they were able to travel around the world, living more months in low-cost countries, yet they still managed to keep their expenses within $40,000 a year. In the meantime, their portfolio has actually grown to $1,300,000.
I must say their very low annual expenses may seem extreme (minimalistic) as it probably involves not having a house that is a home (perhaps a StoreHub will do?), and being prepared to lead a fairly nomadic lifestyle.
It's also easier for them as they do not have children. In their book, they did address those situations involving children though. Nor are they tied down by having to look after their parents - a trait that is perhaps less common for western cultures.
There are various other strategies to optimise expenses that they described in their book. Have a read. I enjoyed it.
Related:
Quit Like a Millionaire - By Millennial Revolution
