Life Expectancy, Baht And Inflation Rate For Retirement Planning

[Mosha]

You also must take into account where you are intending to live. COL varies depending where you are. We have a house & land with rubber on which is not yet ready for cutting. So all I need money for is bills, food, drink, and my wifes fags. We run a pick up and motorbike. We manage well on 20000/month, in BKK you will obviously need more than that.

[bendix]

Interesting discussion.

Agreed that Bendix' response at $500,00 is not right. His model only reinvests 8,000 baht per month, or 96,000 per year, or $3,000 per year at his 32 baht to the dollar rate, to cover inflation erosion on $500,000--something like .67%--not enough for any reasonable esimate on inflation erosion as noted by the OP. More realistically not to deplete the capital you could use 3% and reinvest 3% (i.e. 50-50 on a 6% after-any-tax annual return), to have just $15,000 per year or $1,250 per month or 40,000 baht per month. Doable, but could still erode your capital depending on return, taxes and inflation, and for many at 40,000 baht per month, it would always be tempting to spend a little more here or there. And ahev't checked for best variable annuity rates on $500,00, but would guess it would not be any better.

Cheers.

You're all quite right, of course. My figures are not right. I wasnt intending them as a rule of thumb and I didnt do the calculations in detail. And I think, in fairness, I did say I wasnt taking much notice of inflation which of course is the wrong strategy.

This thread has moved from a discussion about the principle of should one plan to keep one's capital, a portion of it, or none of it into one about how much is the right amount.

So let's get back to that. I admire the balls of those posters who are basing their planning on dieing at roughly the same time as their money runs out. Kudos to you. Me? Well, I feel much working on the premise that I'm going to leave all of my wedge behind for someone else to use.

[pnustedt]

This is a perennial topic, which doesn't detract from its interest.

I believe that how much you need in retirement depends on so many things, not least the behaviour of your partner. If you can live well now and have money left over each month then, with careful planning, you will do the same when you are retired, if you can't live within your means now, then you will tend not to do so when retired.

I gave up "work" two years ago and my income is higher now than my expenditure - I tend to over-estimate my expenditure budget and under-estimate my income. To avoid exchange rate fluctuations I have started a company in Thailand which will give me an income in Thai baht for the forseeable future.

I side with Bendix with estate planning and would rather see my assets growing - I could always splash out on something extravagant somewhere down the line, or meet an unexpected emergency without any major stress.

[geriatrickid]

I read this thread with interest as I want to retire by the time I'm 50. Technically I'm sufficiently wealthy and could do it now I suppose, but I'm terrified of a castrophic event, such as illness or accident. With the exception of Guesthouse in post 24 I see no accounting for this. Most private health plans have lifetime limits and I've seen elderly relatives linger for many years burning up all their savings. The issue today isn't so much a fatal injury or illness but the type of chronic disease or injury that leaves one relying on private care. The annuity tables only account to life, not the quality of that life. If I legally retire outside of my country I lose my public health care benefits, limited as they are and the prospect of commuting back and forth to maintain the 6 month residency homeland requirement aint too much fun when you are 75 with arthritis etc.

So, when you folks do your calculations, are you really reserving sufficient amounts for the cost of care which only increase as we age?

[chiang mai]

I started a small resturant and internet cafe that my wife runs

Any plans to expand into, oh I don't know, perhaps a beauty salon, motorbike rental or laundry? And you're worried about how the Brits think!

[vrsushi]

A question for all those that think that they want to die with their capital untouched.

Have you put your figures through a spreadsheet? Do it and you will see that in order to keep that capital as opposed to my idea of letting it run dry will add many years to your working life.

Now whether that is years in your 40s or years in your 50s or 60s do you really want to spend some of the last "good" years of your life working in your current job (which for most is NOT in Thailand and NOT something that makes them happy) just so that you can die rich?

I agree with financial planning, I have always been cautious. But the world often seems to fall into 2 camps; matey on the "sick buffalo" thread who is 40 without a pot to piss in (nothing wrong with that as such) and those who seem to work in jobs they don't like ( or at least cant compare with living the good life in a place of choosing...Thailand for those reading this) when they often as not could make the switch if they wanted to. Talk of needing a $million is common but really.........for most (99%+) that means retiring when you are an old man. Isnt that too big a price to pay when you can have a good, but not flamboyant life on a half of that and have it from 45?

[vrsushi]

I read this thread with interest as I want to retire by the time I'm 50. Technically I'm sufficiently wealthy and could do it now I suppose, but I'm terrified of a castrophic event, such as illness or accident. With the exception of Guesthouse in post 24 I see no accounting for this. Most private health plans have lifetime limits and I've seen elderly relatives linger for many years burning up all their savings. The issue today isn't so much a fatal injury or illness but the type of chronic disease or injury that leaves one relying on private care. The annuity tables only account to life, not the quality of that life. If I legally retire outside of my country I lose my public health care benefits, limited as they are and the prospect of commuting back and forth to maintain the 6 month residency homeland requirement aint too much fun when you are 75 with arthritis etc.

So, when you folks do your calculations, are you really reserving sufficient amounts for the cost of care which only increase as we age?

This is a good example.

To save up enough to pay for the "possibilty" that you might end up with outzeihmers and need 15 years of care (and lets be honest..we would all want that to be back in a western country) makes retirement an impossibilty for all but the super rich.

But again I would say that people would rather have the good life now (presuming that being in Thailand playing tennis, swimming, flirting, watching sunsets etc is better than the job you have) and enjoy it for 30 or 40 years than work until I am 70 in a cold country cuz I was too worried about needing specialist care if I reached 90.

[Naam]

read my lips! don't even think of ever touching your capital. on the contrary, try to increase it to compensate for inflation.

[Gary A]

I tend to be quite conservative and keep my nest egg for unexpected emergencies such as major medical problems. (I have Thai health insurance). Hopefully I will never need it but one never knows. When I first came to Thailand the exchange rate was 25 baht to the dollar. I based my needs on that figure. It would have been easy to use a better exchange rate but I decided that since it was once 25 to a dollar it could possibly return to that. The far better exchange rate allowed me to have a nice surplus and things have worked out well for me. I'm far from being wealthy but I expect to be comfortable for the rest of my days. Thailand is a great place to retire, BUT, I wouldn't much enjoy keeping to a strict budget.

[BEENTHEREDONETHAT]

My retirement has gone pretty much the way Bendix plans his. I save a minimum of 10% of my earnings each year typically much more than that. I don't particularly worry about interest rates or inflation. What I am more concerned about is paying interest and paying taxes. By minimizing them your capital will grow much faster. My money is in several countries so exchange fluxuation can be minimized by moving $ from whichever ones is most favorable to the Baht at the time.

I think it is a good idea to rent until you are sure you want to live here, but once you are sure you should buy. I know, I know you can lose it all, but then you can rent for 20 or 30 years and watch your rent increase every few years. A place to live is probably the single most expensive expenditure you will have, by owning you eliminate one large variation in cost of living. Inflation will not get to you near as much when you own.

As far as annuities go I don't think much of them for retirement. A 20 year annuity provides for you for 20 years and then what? Once they stop there is nothing left. Had I done that I would be hurting now.

If you can figure out how much you will reguire to live a year and add a minimum of 10% for annual growth (more would be better) then never touch the principal and if your earnings drop you adjust your life style to fit your earnings. Do set aside enough for emergencies, like medical and essentially forget about it and let it grow.

We have been doing this for 24 years and have considerable more now than when we started. And I don't worry about my wife getting along once I'm gone as she will be quite comfortable. When she dies anything left she will pass on to the kids.

Personally I am a big fan of retirement. Have enjoyed every minute of it. Would have hated to wait until I was 65 to do it, I would have rather gotten along on a little less, but not to the point of having to constantly worry about money.

It is not nearly as complicated as some people make it out to be. It is more a matter of being willing to adjust your lifstyle to your$$.

Good Luck.

[dumspero]

I don't see the healthcare as that big a deal. Am budgeting $200 per month at 50, my planned retirement, rising to about $300 in today's dollars over the next few decades. That's more than enough for catostrophic cover with a very high deductible (just be sure and read the fine print on the complete policy re exactly what's covered and how it works--basically, if you get cover out of the US the insurer loses if the policy isn't clear, but one must read the whole thing carefully, however tedious). And for small stuff I'd just go to a local clinic.

There are good, reasonable alternatives where one can deplete the capital (although again, that's not my plan). The idea of switching from living off interest to buying an immediate annuity at some point in one's 60's or 70's does seem like a good plan 'B' if the capital erosion is threatening to get out of hand. Annuities are certainly not recommended as part of a retirement plan for most of us in our 50's or earlier, but there seem to be a variety of options that can be useful later on.

If one buys an annuity (can be set payment amount or tied to inflation), as long as it isn't a fixed term (e.g. 20 years or whatever), there really is no risk of running out of money. Just the downside of inflation erosion or a lower monthly payment if one gets an inflation adjusted annuity (although the older one is when one buys, the less this is a factor). The only other risk is the company will go BK with no bailout. So it's a bit of a tradeoff, but it does effectively reduce the risk of living longer than one expected.

Anyway, just my two cents and I'm certainly not a retirement or financial advisor. Agreed with the OP it would be interesting to see how others are planning for the unknowns of rates and age of death.

Cheers to long and responsive (but not limp) retirements.

[ronz28]

For life expectancy I consider that of my parents and grandparents. I wouldn't be surprised to live to age 95-100 with normal progression of life from their age at death. I am in the camp of never spending down the corpus of our portfolio. We plan to live on less than our pensions and continue to build stock holdings. The only fly in the ointment I can see is having to go into a nursing home as we have no long term care insurance just ,,,Blue Cross Health Insurance that has annual limits on nursing home care. I understand long term care insurance is overpriced and less than 25% of people end up needing it.

I have lived in Thailand when the rates were 20 baht to the dollar but everything was a lot cheaper. I don't know how to plan on exchange rates as they can go either way. We may continue to live in the US in retirement and just travel to Thailand. I think if exchange rates go too much against us we will adjust and cut expenses and spend more if it goes in our favor. That's life.

[xyborg]

<br />I am trying to sort out my future non-working life. Living costs are not too dificult to arrive at now, but of course the trouble is how to judge the baht rate to the pound in my case. And also the rate of inflation.<br /><br />Iv'e been assuming that the rate of inflation and exchange rate, in combination, will stay relatively stable in todays terms. Simply put, that 1 beer in a British pub will always buy you more or less 2 large bottles in a Thai bar.<br /><br />So this being the case, if my assets are inflation linked to the Uk then I will be ok.<br /><br />The trouble is that this is being challenged at the moment. I started working this out when it was 72 baht to the pound, adjusted my finances to 67, readjusted again to 65 and now wondering if I should use 60......or heaven forbid even lower. I also fear that inflation in Thailand may run hiher than the UK and not be made up for in terms of exchange rate. I.e, that Thailand has and will get more expensive in pound terms.<br />Of course the danger lies both ways. Waste my good years working to increase my pot when I needn't. (I am a firm believer that life is for today if you can. Your 40's are far better than your 60s for example) I would consider it a failure to die with a large chunk of money left unspent. But then again running dry in my 70s would be pretty miserable too. <br /><br />So just curious, what do other posters use as their life expectancy, baht and exchange rates?<br /><br />Me now, 84 (after this its back to blighty I presume) 63bht to the pound, Uk inflation<br />

<br /><br /><br />

Seriously I would spread investmetns far and wide I have land and property in several countries and currencies such as the UK, Europe and 4 Condos in Thailand all rented (this way the £ dips or € dips or Thai baht dips its not total devestation. Cash them in as u need to . There are no guarantees with anything it just lowers your risk.

[freitag1]

For long term investments (7-10 years) you might want to consider ETFs (exchange traded funds), I recently inherited some money and invested 70% in an ETF world porfolio (which is a combination of single ETF funds picked by me and a relative who is a stock broker). My whole investment strategy is considered medium risk and has a projected 8% p.a. in Euro. The other 30% are in small risk investments to balance the whole.

[GuestHouse]

But the world often seems to fall into 2 camps; matey on the "sick buffalo" thread who is 40 without a pot to piss in (nothing wrong with that as such) and those who seem to work in jobs they don't like

Can we add a third camp to that… Those of us who are quite happy with living the life we have today, including, shock horror, enjoying the work we do, and who see Thailand as one of many good things in our lives, not the be all and end all of our lives.

[naka]

But the world often seems to fall into 2 camps; matey on the "sick buffalo" thread who is 40 without a pot to piss in (nothing wrong with that as such) and those who seem to work in jobs they don't like

Can we add a third camp to that… Those of us who are quite happy with living the life we have today, including, shock horror, enjoying the work we do, and who see Thailand as one of many good things in our lives, not the be all and end all of our lives.

A few of my affluent friends are also terrified of retiring ... Into the unknown ... or such

Naka.

[GuestHouse]

A few of my affluent friends are also terrified of retiring ... Into the unknown ... or such

Naka.

I don't doubt it.

However, I think when discussing retirement planning on a forum where the emphasis is 'getting to Thailand' its worth pointing out that working is a great way of saving for retirement.

Wishing today's life away dreaming of some future life in Thailand is wasting life today and now.

It is of course all about getting the balance right but bear in mind we hear about guys who get it right and manage to settle into a secure retirement. Those that get it wrong and forced by lack of money have to return to the job and life they retired from (if the job and life are still there) are a little more reticent.

[chiang mai]

A few of my affluent friends are also terrified of retiring ... Into the unknown ... or such

Naka.

I don't doubt it.

However, I think when discussing retirement planning on a forum where the emphasis is 'getting to Thailand' its worth pointing out that working is a great way of saving for retirement.

Wishing today's life away dreaming of some future life in Thailand is wasting life today and now.

It is of course all about getting the balance right but bear in mind we hear about guys who get it right and manage to settle into a secure retirement. Those that get it wrong and forced by lack of money have to return to the job and life they retired from (if the job and life are still there) are a little more reticent.

Agreed. Allwanabe newbies should heed those words well.

[lannarebirth]

read my lips! don't even think of ever touching your capital. on the contrary, try to increase it to compensate for inflation.

This is the only answer that will work for every person.

[IMChris]

I started a small resturant and internet cafe that my wife runs

Any plans to expand into, oh I don't know, perhaps a beauty salon, motorbike rental or laundry? And you're worried about how the Brits think!

Sorry your point is? It's keps a roof over my head and food on the table any other questions?

I guees my beer joke hit to close to home.

[Jingthing]

read my lips! don't even think of ever touching your capital. on the contrary, try to increase it to compensate for inflation.

This is the only answer that will work for every person.

False.

The goal of retirement financial planning is to have enough money and to never run out of money in your lifetime. That is not the same thing as increasing your capital as you age. The easiest way to think about this is to assume you are very wealthy. Say you have 100 million dollars. Most people think one million is enough to retire on. So by the quoted incorrect theory, this 100 millionaire should strive to have 300 million by the time of death. In actuality, if he spent down to a milllon he would be doing much better. People fail to see there are stages of life. Working. Investing. Retirement is largely about SPENDING and you can fail in that by either spending too much or too little.

I have a question about this. Before moving to Thailand, I never heard anyone who knows anything about retirement financial planning suggest that the goal in retirement (after retirement) is to always increase your nest egg, and never, ever spend any of your initial capital, except if your primary goal is to pass on your money after death to someone else. Is this some kind of thing people in the UK are taught (or to my view, brainwashed)? It also comes off as a total western denial of death, something you would think people interested in Thailand where death is less hidden than the west would be cured of.

Edited February 12, 2008 by Jingthing

[torrenova]

I'm a classic example. I have assets outside LOS, brought some cash here and built up a few small businesses, occassionally selling up if the price was right. I was way below the retirement age and thus I needed to generate an income at least equivalent to my expenditure in LOS to protect my external assets. Excluding non Thai assets, I wanted to generate an income of 200% of expenditure within 3 years and 300% of income within 5 years.

Last year was not so good in business terms but I had a huge hit personally; the missus fell pregnant and had a baby !

Now my argument to myself is that whilst I never envisaged being a father, I had not been in for a vasectomy so perhaps I had a deep routed unconcious desire to reproduce, I don't know ?

Suffice to say that my Bt20,000,000 project as I call my daughter has sort of thrown a spanner in the financial calculations. Rather than a condo I needed a house, a vehicle and all the other baby costs and that was just in year one. The next few years will be cheaper but then the costs will rise massively as school fees kick in. Bt20m may not be enough !

So I have re-assessed my position. I am loathe to bring more cash into LOS but I may make the decision to return to corporate life (if I can) for a few years to kickstart building the required cash here. Luckily I may yet be young enough to do this but what happens to a guy in his late 50's or 60's who has a kid and is currently living near his income level ? Totally screwed is what happens as there is little or no hope of more work unless he starts a business.

[bendix]

The goal of retirement financial planning is to have enough money and to never run out of money in your lifetime. That is not the same thing as increasing your capital as you age. The easiest way to think about this is to assume you are very wealthy. Say you have 100 million dollars. Most people think one million is enough to retire on. So by the quoted incorrect theory, this 100 millionaire should strive to have 300 million by the time of death. In actuality, if he spent down to a milllon he would be doing much better. People fail to see there are stages of life. Working. Investing. Retirement is largely about SPENDING and you can fail in that by either spending too much or too little.

I have a question about this. Before moving to Thailand, I never heard anyone who knows anything about retirement financial planning suggest that the goal in retirement (after retirement) is to always increase your nest egg, and never, ever spend any of your initial capital, except if your primary goal is to pass on your money after death to someone else. Is this some kind of thing people in the UK are taught (or to my view, brainwashed)? It also comes off as a total western denial of death, something you would think people interested in Thailand where death is less hidden than the west would be cured of.

With respect Jingthing, the "goal of retirement financial planning" is whatever the individual in question thinks it is. What might work for you doesnt necessarily work for others.

Some of us embrace risk; others are more risk averse. To castigate those of us who want to be able to sleep at night without worrying that living a long life might have screwed up our calculations as 'brainwashed' is unfair.

Me? I am planning to have a long retirement playing golf, relaxing, travelling and sitting in the sun doing sweet FA with no financial worries at all. And when I'm dead, there will be more than enough for both Mrs Bendix and for a substantial donation to Thaivisa Bendix Memorial Fund, a the income from which will be awarded annually to a poster who has got their retirement calculations wrong.

[chiang mai]

I started a small resturant and internet cafe that my wife runs

Any plans to expand into, oh I don't know, perhaps a beauty salon, motorbike rental or laundry? And you're worried about how the Brits think!

Sorry your point is? It's keps a roof over my head and food on the table any other questions?

I guees my beer joke hit to close to home.

Ah yes, the great transatlantic humor divide rears its ugly head yet again.

[Neeranam]

Worrying about my financial security in the future will shorten my life expectancy.

I decided that paying 4 years into the UK pension plan was enough. It's a huge gamble - I could be dead tomorrow or when I'm 65, the pension age will probably be higher.

When I was 20, my friends said I'd be dead at 30. Every day is a bonus now. Living for today is the only way for me. I have a very strong faith that "everthing little thing's going to be alright".

My daughters are my pension plan, although not real plan - I'll put a lot of money into their schooling so they can get good jobs and take care of their Thai mother as is the culture. I'm taking care of their mother now, so she can look after me when I'm old.

I've managed to find a job which I love - I actually do it in my time off, so I'm happy to be working when I'm 80, if I'm still here.

"Do Not Be Afraid Of Tomorrow. God Is Already There"

[dumspero]

No one answer is right for everyone.

One would hope that since we all travel, live in different places and see different cultures that we would be a little more hesitant to try to force the old 'one size fits all' shoes on all the other posters.

I like the way Neeranam not only has found his own solution, but is content with it. Agreed with Bendix as noted above that there are different solutions for different folks, but then he goes on to imply that those persons at the riskier end of the continuum (whether there by choice or otherwise) will somehow necessarily worry about it. That's just not true, as Mr. Neeranam demonstrates.

[bendix]

No such implication intended, dumspero, but i can see how you could read it that way. It's my sloppy writing, rather than any extrapolation of my own conservativeness onto others.

For the record, while Neeranam and I have had our run-ins on this forum, I am envious of his peace of mind and genuinely wish I was the same. I don't so that means I'm trading a few extra years working to get to it.

Each to their own.

[Neeranam]

No such implication intended, dumspero, but i can see how you could read it that way. It's my sloppy writing, rather than any extrapolation of my own conservativeness onto others.

For the record, while Neeranam and I have had our run-ins on this forum, I am envious of his peace of mind and genuinely wish I was the same. I don't so that means I'm trading a few extra years working to get to it.

Each to their own.

Absolutely, no two people are the same. It's human nature to envy others. While Bendix envies me for my peace of mind, I envy him for his probable financial stability. It's difficult to have both some we have a go at each other from time to time

It's important to accept you situation in life and make the most of it.

[Naam]

read my lips! don't even think of ever touching your capital. on the contrary, try to increase it to compensate for inflation.

This is the only answer that will work for every person.

False.

The goal of retirement financial planning is to have enough money and to never run out of money in your lifetime. That is not the same thing as increasing your capital as you age.

either you need reading glasses Jingthing or my german english is hard to understand. increasing capital to compensate for inflation is no actual increase and as we don't know what the future has in store for any of us as far as inflation is concerned one should be on the safe side... of course only IF one can AFFORD it.

[Jingthing]

Most retirees have some kind of pension that does indeed increase based on inflation. There is an end game and it is death, and it is your friend in retirement financial planning. The idea is to not run out of money as long as you live, and given that we all have expiry dates, there you go, you really do not need to be Bil Gates to retire. The ultra paranoid seem to be telling people they can almost never afford to retire. I am just trying to suggest a balance to that. Most people eventually do retire, they don't have as much money as they might have dreamed about, but most cope, and find ways to enjoy their lives, just as they did during their working years. In other words, get real, most of us aren't rich and never will be.

Edited February 13, 2008 by Jingthing