Hey readers! If you’ve been reading my blog for a while, you would know – and maybe have gotten sick of – my FIRE number, **S$2,162,162.**

This is my target amount that I need in my investment portfolio – a portfolio built around the Bogleheads 3-Fund Portfolio, but modified for Singaporeans – that will generate enough passive income for me to live comfortably in Singapore forever.

The amount was calculated with a 3.33% safe withdrawal rate – to be more conservative than the 4% rule – using a rough estimate of **S$6,000 expense per month** just for myself.

However, since I published my recent post on the Minimum Portfolio Value for Financial Independence in Singapore, I felt that “rough estimates” and “assumptions” on my expenses wasn’t good enough. That post showed me that I won’t likely need anywhere near S$6,000 to be financially independent so I want to find out my minimum number.

I wanted to get as detailed as possible on my expenses and get the most likely figure that I will be spending when I retire. Then if I wanted to top up for “creature comfort” – which will extend the time I need to save and invest to reach FIRE – I am at least making a conscious choice.

So I started breaking down my expenses and label the expenses per each category. Here’s what that looks like:

Category | Monthly | Yearly |

Parents Allowance | S$1,000 | S$12,000 |

Children (2) | S$1,000 | S$12,000 |

Mortgage / Rent | S$800 | S$9,600 |

Utilities | S$100 | S$1,200 |

Transportation | S$300 | S$3,600 |

Food | S$600 | S$7,200 |

Phone Plan | S$60 | S$720 |

Early Critical Illness Insurance | – | S$1,300 |

Term Life Insurance | – | S$1,900 |

Accident Insurance | – | S$120 |

Hospitalisation Insurance | – | S$800 |

Vacation Fund | – | S$6,000 |

Total | – | S$56,440 |

Based on the above breakdown, I will only need S$56,400 to cover all I need for “comfortable living” in Singapore for me.

This translate to about S$47,00 per month in required passive income from my investment portfolio, which will require about S$1,695,000 with a 3.33% withdrawal rate.

That’s a whole S$1,300 per month and S$15,600 per year less than my original estimate! This translates to S$467,162 of the portfolio value less for my FIRE number and cuts the estimated number of years I’ll need to save up by 1.5 years!

Just like that, I’ve shortened the number of years I’ll need to work to be financially independent!

Clearly, in my previous FIRE amount, I’ve left quite a lot of room for safety “just in case” so that I might be able to spend more on travel or make “want” purchases instead of “needs.” However, I still feel like I should allocate some amount for this, so I’m going to adjust my number to S$5,000 per month – **with S$300 of monthly buffer** – instead of the above S$4,700 (might be too little) or the previous S$6,000 (way too high.)

This means a **new FIRE amount of S$1,801,802 at 3.33% withdrawal rate**, still a whole 1.1 year less than the original FIRE number.

So I think I will go with that. What do you think? I’d love to hear what FIRE number you are working towards and why!

Until next time.

FPL

You may wish to consider adding some slack for miscellaneous spending and something for health care.

Every now and then you may need to get a new computer/phone/oven/tennis racket/ etc

Health are can also get expensive when you are older. Eg a rider for shield plan may cost $600 per annum in your 30s but it quickly becomes $2K+ in your 60s/70s. There may also be one off medical expenses, pregnancy, vaccines, broken something from a soccer game etc.

Hey Kardtoon! Definitely agree with you there! The healthcare cost will certainly increase and there will be occasional unforeseen expenses. I think that’s also why there’s some wiggle room (additional S$300 per month or S$3,600 per year) that’s been added for this. Keep in mind that this is for just me, my wife will have a similar portfolio which she will draw from, so this is just half of our household income.

Additionally, this number does not include CPF LIFE payout so that will start coming in when I turn 65 which will really help once it kicks in.

Also, there’s padding on the safe withdrawal rate as well – 3.33% withdrawal instead of 4%. So this is another buffer which should allow us to be a bit more flexible with our expenses in case of anything unforeseen.

I’m quite confident that we have enough cushion here even at S$5,000 per month 🙂

What numbers are you looking at yourself?

Hi, I am new ETF investor. As far as I understood, to calculate FIRE you need to multiply your annual spendings by 25. This will or should give you a lifetime financial independence based on 4% withdrawal rate. Let’s assume you are 35 and are going to save until 55. You will die 35 years later at 90. In the end of your journey are you expected to still have your capital invested preserved or the 4% lifetime withdrawal assumption is based on getting your whole investments completely drained? Because logically (to me at least) if the markets are on average 6-7% up per annum in the long run, I should be able to live off the “interest” (market gains) without touching the original capital invested. So if your target would be for example: 60,000 per year * 25 = 1 500,000 / 4% = 60,000. But maybe I am getting something wrong? Thanks.

The 4% rule was calculated using a 30-year retirement period and assumes that a “success” is that the portfolio does not go below $0 throughout the 30 year period, however does not require that the portfolio maintains its value. So if you follow the 4% rule in a 30 year retirement, you can end up with almost $0 in your account at the end. In fact, based on the 4% rule, after 30 years, 5% of the population of investment scenarios would have failed (essentially a 95% success rate.)

The thing to keep in mind that market returns are not constant. Some years you will make 10% gains, some years 20% gains, however the reverse is also true. Some years you could *lose* 3% or 20%. The figure that is often quoted is an “average” return. On average the market goes up by 7%-8% real return (after adjusting for inflation) each year, so over the long run, you will get that return.

However, it’s possible that the market drops by 20% right at the start of your retirement and basically your 4% withdrawal turns into a 5% withdrawal. That could put your portfolio in jeopardy because you retired right at the start of a recession. This is called the sequence of return risk, if you’d like to read up more about this, I suggest to check out this blog post:

https://earlyretirementnow.com/2017/05/17/the-ultimate-guide-to-safe-withdrawal-rates-part-14-sequence-of-return-risk/

Thanks for the explanation. Yes, the worst can happen once you start reaching to the pockets… However there is one more thing which I don’t think this 4% formula does account for: the older you get, the less you need to spend (well, apart from healthcare I guess) – or at least this is the way I see it. There is also another thing, if you are a long term expat living overseas in multiple countries, you don’t really know what’s your FIRE number should be, because your spendings depend on the country you currently live in, while your spending needs in a country chosen for retirement, could be completely different. Hence the 25x formula is a bit flawed for expats, what do you think?

1. Older you age, the less you spend. This could be true. Like you say, healthcare cost does increase. However, the 4% rule is more of a rule that allows you to plan how much you’d like to be able to spend and plan from there rather than a tool that adjusts based on your age over time, so use it as a way to estimate how much you’ll need to FIRE based on how much you’d like to be able to spend.

2. In terms of being an expat. You are right, it’s going to be difficult to get an accurate amount you’ll need if you move around to different countries all the time. However, you could estimate using the maximum that you’ll need. The drawback is that you might end up saving too much if you’re using the maximum. You could try to plan for an average number instead. The great thing about being an expat, if you can choose where you will travel, if you are running lower on your investments than you expect, you could move to a cheaper cost of living country to reduce your expenses and allow the portfolio to recover.

Hi, thanks for your thoughts. What are the tax implications of selling ETF shares in Singapore, do you have to pay income tax on profits? What is the method of tax calculation on ETFs profits, is it FIFO based? Did you include that tax in your yearly withdrawal calculation above?

Fortunately there is no capital gains tax in Singapore, so all proceeds from selling shares are not taxed. It is also not counted as “income” so are not taxed under income tax either. That’s one of the great things about investing in Singapore.