Reality Check Please

[tink2mutt]

I am ready to retire in November this year.

I have a house near Chang mai and have bought a car. I am married with no children - my wife and her family are from the area we are moving to. Not much extended family support needed - practically none.

I have $600,000 (US) in two portfolios: half in Australian super (50% Australian equities and 50% Bonds) and half in Gernsey portfolio (50% emerging market equities and 50% global bond).

I plan to live on 4% withdrawl rate supplemented with some piece meal work in Dubai and I am planning on returning 3% to the principle for inflation. A conservative 7% expected from the 50/50 investment mix. My thailand budget will be 70,000 baht a month.

So, you guys seem to be astute with your investments from what I read. Please give me a reality check - am I on the right track? have I overlooked anything obvious?

Once I take the plunge from full time work to some part time there is no turning back.

Your assistance would be greatly appreciated.

[FarangBuddha]

Seems like a good plan...but is a 7% return "conservative"? Is this based on long-term (at least 10years) performance of the fund in question?

[tink2mutt]

Seems like a good plan...but is a 7% return "conservative"? Is this based on long-term (at least 10years) performance of the fund in question?

Yes - long term estimate.

Who knows - but historically balanced finds can be expecetd to return more than 7%.

However, I wish the market would pick up.

[MYKTHEMIN]

must be dreaming to think 7percent I would aim much lower, say 3 or 4 percent may be more realistic

[craigt3365]

Seems like a good plan...but is a 7% return "conservative"? Is this based on long-term (at least 10years) performance of the fund in question?

7% is a fantastic return lately. Gold is down, stocks going sideways...past performance is no longer a good indicator. Right??

[tink2mutt]

Seems like a good plan...but is a 7% return "conservative"? Is this based on long-term (at least 10years) performance of the fund in question?

7% is a fantastic return lately. Gold is down, stocks going sideways...past performance is no longer a good indicator. Right??

That is true - these last few years have not been good. And past performance is no longer an accurate indicator of future returns - agreed.

That is why I am getting as many reality checks and views that I can.

[Chivas]

7% is in my opinion highly achievable although I am happy to admit my views on investing will differ to most.

I would happily guarantee 7% myself averaged over a nominal 10 year period, as long as I keep the additional monies !!

The problem with inviting answers on a forum such as this (good that it generally is) is that you'll end up with more doubts and questions than you'll start with.....

Personally I would go for 8.5% return.

[tink2mutt]

7% is in my opinion highly achievable although I am happy to admit my views on investing will differ to most.

I would happily guarantee 7% myself averaged over a nominal 10 year period, as long as I keep the additional monies !!

The problem with inviting answers on a forum such as this (good that it generally is) is that you'll end up with more doubts and questions than you'll start with.....

Personally I would go for 8.5% return.

Thank you Chivas.

My question to you is - do you think that 7% is too optimistic given a 50% equity/50% bond split?

[JohnnyGray]

$600k is a decent pension pot. Your plan to re-invest 3% to maintain the value of your savings is sound. But your 7% average projection based on the investments you mention is probably over-optimistic and certainly not guaranteed.

One thing you could consider is buying a joint annuity, designed for a prospective pensioner like yourself and your wife.The products available include joint-life and joint-survivor annuities, where payments only stop upon the death of both of the annuitants. For example, an annuity can be structured to make guaranteed annual payments to a married couple, the payments ending on the death of the second spouse.

It's a complicated area and I suggest you seek professional advice and get at least 6 quotes, based on, as an example, a $500k joint annuity investment. Then compare their numbers with your projections.

Good luck!

[Chivas]

7% is in my opinion highly achievable although I am happy to admit my views on investing will differ to most.

I would happily guarantee 7% myself averaged over a nominal 10 year period, as long as I keep the additional monies !!

The problem with inviting answers on a forum such as this (good that it generally is) is that you'll end up with more doubts and questions than you'll start with.....

Personally I would go for 8.5% return.

Thank you Chivas.

My question to you is - do you think that 7% is too optimistic given a 50% equity/50% bond split?

No I personally believe its perfectly achievable. But you're asking a guy with a hefty pair of balls when it comes to trading, so my views are going to be slightly tainted compared to most.........

The previous poster made a good point of getting quotes from many "advisers" to give different opinions.

[tink2mutt]

7% is in my opinion highly achievable although I am happy to admit my views on investing will differ to most.

I would happily guarantee 7% myself averaged over a nominal 10 year period, as long as I keep the additional monies !!

The problem with inviting answers on a forum such as this (good that it generally is) is that you'll end up with more doubts and questions than you'll start with.....

Personally I would go for 8.5% return.

Thank you Chivas.

My question to you is - do you think that 7% is too optimistic given a 50% equity/50% bond split?

No I personally believe its perfectly achievable. But you're asking a guy with a hefty pair of balls when it comes to trading, so my views are going to be slightly tainted compared to most.........

The previous poster made a good point of getting quotes from many "advisers" to give different opinions.

Yes - the annuity idea from the previous poster is a good one and I will look at that.

As the time gets closer I get more jittery - do my figures add up or am I fooling myself about the potential - I keep mulling that over in my head.

But your advice has been helpful and thanks for that.

[Lefty]

Your plan looks acheivable, and probably better than 80% of of the plans of expats trying to surive in Thailand.Be sure you give some as to how to handle medical costs.

Lefty

[rakman]

I think I might see a "flaw" in your math. $600,000 is a good starting point, 4% is $24k/yr or $2k /mo, yet your monthly budget is bt70k, which is a few baht high, but you also mentioned some additional casual work, so the numbers might average out.

If you own your home (no loan) and possibly the wife works a little, then I'd say the numbers are pretty good. If you're looking at a very western lifestyle, then it might be tight, if you live more Thai style, then you'll be fine, except inflation might be higher than expected.

Looking at historical recessions/depressions the world appears to be ready to start expanding as pent up demand is starting to occur. A lot will depend on political outcomes in the current election cycles and various hot spots around the world.

All in all, depending on your age, even if you're eating up a bit of the principle over time, you come into the world with nothing, leaving the same way isn't so bad.

[Chivas]

I think I might see a "flaw" in your math. $600,000 is a good starting point, 4% is $24k/yr or $2k /mo, yet your monthly budget is bt70k, which is a few baht high, but you also mentioned some additional casual work, so the numbers might average out.

If you own your home (no loan) and possibly the wife works a little, then I'd say the numbers are pretty good. If you're looking at a very western lifestyle, then it might be tight, if you live more Thai style, then you'll be fine, except inflation might be higher than expected.

Looking at historical recessions/depressions the world appears to be ready to start expanding as pent up demand is starting to occur. A lot will depend on political outcomes in the current election cycles and various hot spots around the world.

All in all, depending on your age, even if you're eating up a bit of the principle over time, you come into the world with nothing, leaving the same way isn't so bad.

Rakman a very very good point made in your final sentance.

That is a scenario that I actively agree with. I read of so many guys making elaborate plans to also drop dead 10 minutes after retiring ??

Live a little (or a lot) for today......

[tink2mutt]

I think I might see a "flaw" in your math. $600,000 is a good starting point, 4% is $24k/yr or $2k /mo, yet your monthly budget is bt70k, which is a few baht high, but you also mentioned some additional casual work, so the numbers might average out.

If you own your home (no loan) and possibly the wife works a little, then I'd say the numbers are pretty good. If you're looking at a very western lifestyle, then it might be tight, if you live more Thai style, then you'll be fine, except inflation might be higher than expected.

Looking at historical recessions/depressions the world appears to be ready to start expanding as pent up demand is starting to occur. A lot will depend on political outcomes in the current election cycles and various hot spots around the world.

All in all, depending on your age, even if you're eating up a bit of the principle over time, you come into the world with nothing, leaving the same way isn't so bad.

This feedback is really good to get me thinking critically about the plan.

Yes - I can earn an extra $10,000 a year with some consulting work to bring it up to 70 or 80k baht a month.

It is the return on investment that I can expect that makes me afraid. But as you say - if the principal gets worn down it's not the end of the world.

My sons will probably spend the inheritance on booze and chasing tail anyway!!

[craigt3365]

As mentioned above, medical costs can get ya. Cancer, heart problems, accident. Many ways to blow a big amount of money. Not to mention inflation. A real killer. I use to think $1MM was fine, I don't think that any more.....

[JohnnyGray]

Just did a quick search on the internet for annuities...if you are 60 and your wife is 50, from one reputable provider you'd get a guaranteed 38,889.38 THB per month for a $600k investment, plus 3% extra each year for the rest of your lives.

If either or both of you are smokers or in poor health (that you can prove) you can expect to get more.

[12DrinkMore]

If either or both of you are smokers or in poor health (that you can prove) you can expect to get more.

So how on earth does that work?

Do they insist on a minimum number of cigarettes each day?

With that condition I'd simply declare I was a five pack/day man for the last forty years. Does a smoker have to go for a "bad health" verification visit to the doctor? Are you allowed to give up once the annuity gets started, or is there a minimum level of nicotine consumption to continue the policy?

[12DrinkMore]

You have not mentioned your age, which is the most important factor in the whole equation.

A consistent 7% return on financial investments is unlikely to be achievable for 99.99% of people. And you have to consider the rate of inflation in Thailand plus the currency exchange risk in having your assets outside of Thailand.

On the positive side your expected outgoings of 70k / month are very generous and there is a lot of room to reduce them if things start looking not so rosy.

I would recommend

1. Moving a few years' expenses to Thailand, 3.4% tax free interest at the big banks

2. A decent health insurance. The top hospitals provide great service but at a cost.

3. Maintaining the part-time source of income as long as it is possible, keeping the brain active and providing something to do.

Edited April 22, 2012 by 12DrinkMore

[Naam]

7% is in my opinion highly achievable although I am happy to admit my views on investing will differ to most.

I would happily guarantee 7% myself averaged over a nominal 10 year period, as long as I keep the additional monies !!

The problem with inviting answers on a forum such as this (good that it generally is) is that you'll end up with more doubts and questions than you'll start with.....

Personally I would go for 8.5% return.

as opposed to the OP your claim must be based on actively managing your portfolio Chivas. only then 8.5% or more is realistic.

[JohnnyGray]

If either or both of you are smokers or in poor health (that you can prove) you can expect to get more.

So how on earth does that work?

Do they insist on a minimum number of cigarettes each day?

With that condition I'd simply declare I was a five pack/day man for the last forty years. Does a smoker have to go for a "bad health" verification visit to the doctor? Are you allowed to give up once the annuity gets started, or is there a minimum level of nicotine consumption to continue the policy?

It's logical really. Smokers die younger on average than non-smokers. So the insurance company, using their statistical evidence, take a bet and offer smokers a better monthly return than for non-smokers, on the assumption that they won't have to pay out as long on the $600k invested for the majority of smokers compared to non-smokers

[12DrinkMore]

If either or both of you are smokers or in poor health (that you can prove) you can expect to get more.

So how on earth does that work?

Do they insist on a minimum number of cigarettes each day?

With that condition I'd simply declare I was a five pack/day man for the last forty years. Does a smoker have to go for a "bad health" verification visit to the doctor? Are you allowed to give up once the annuity gets started, or is there a minimum level of nicotine consumption to continue the policy?

It's logical really. Smokers die younger on average than non-smokers. So the insurance company, using their statistical evidence, take a bet and offer smokers a better monthly return than for non-smokers, on the assumption that they won't have to pay out as long on the $600k invested for the majority of smokers compared to non-smokers

Yes, I can understand that.

So what is preventing me to declare myself a smoker? I last smoked a cigarette about forty five years ago, but I could buy a pack today and have a quick drag whilst answering "yes" to the question "are you a smoker?"

[Chivas]

7% is in my opinion highly achievable although I am happy to admit my views on investing will differ to most.

I would happily guarantee 7% myself averaged over a nominal 10 year period, as long as I keep the additional monies !!

The problem with inviting answers on a forum such as this (good that it generally is) is that you'll end up with more doubts and questions than you'll start with.....

Personally I would go for 8.5% return.

as opposed to the OP your claim must be based on actively managing your portfolio Chivas. only then 8.5% or more is realistic.

Indeed a fair assumption....

[JohnnyGray]

If either or both of you are smokers or in poor health (that you can prove) you can expect to get more.

So how on earth does that work?

Do they insist on a minimum number of cigarettes each day?

With that condition I'd simply declare I was a five pack/day man for the last forty years. Does a smoker have to go for a "bad health" verification visit to the doctor? Are you allowed to give up once the annuity gets started, or is there a minimum level of nicotine consumption to continue the policy?

It's logical really. Smokers die younger on average than non-smokers. So the insurance company, using their statistical evidence, take a bet and offer smokers a better monthly return than for non-smokers, on the assumption that they won't have to pay out as long on the $600k invested for the majority of smokers compared to non-smokers

Yes, I can understand that.

So what is preventing me to declare myself a smoker? I last smoked a cigarette about forty five years ago, but I could buy a pack today and have a quick drag whilst answering "yes" to the question "are you a smoker?"

I don't represent the insurance firms that make good money out of annuities. They're not daft. Try it if you ever want to buy an annuity and think you can get one over them

[AngryParent]

Reality check?

Well, ignoring the fiscal viability of your plan, I think a loose attitude will be a bit more dangerous.

Do watch your figures in public. And figures are not the same as a lady's.

Stated with all the best.

[KeyserSoze01]

To the OP, you didn't mention your age, but did say that you nearing retirement. If you want to maintain your principle investments without depleting that balance, then 4% is the "de facto" draw-down rate quoted by many investment houses as a safe withdrawal rate. Seeing that you do not have any offspring, then why preserve the original capital? I am not saying to run through your capital like crap through a goose, but using the 4% draw-down and in those times where you need additional $$$, you can tap your principle as needed.

If you are basing your annual gains strictly on an equities performance, you may want to investigate high yield equities as there can be a greater return. Yields approaching 10%+ are not unheard of.

Other factors are other retirement income which you did not mention. If you are an Aussie, don't you qualify for Australian retirement income?

[JohnnyGray]

Reality check?

Well, ignoring the fiscal viability of your plan, I think a loose attitude will be a bit more dangerous.

Do watch your figures in public. And figures are not the same as a lady's.

Stated with all the best.

What?????

[AngryParent]

Reality check?

Well, ignoring the fiscal viability of your plan, I think a loose attitude will be a bit more dangerous.

Do watch your figures in public. And figures are not the same as a lady's.

Stated with all the best.

What?????

If you state who you are, where you are and what you have in this small place called Thailand (and a forum), then quite simply the asset plans have limited value in a land of sharks. Just a reality check from another perspective.

[RKASA]

"My sons will probably spend the inheritance on booze and chasing tail anyway!!" At least you won't have to worry about it all being wasted then.

[tink2mutt]

You have not mentioned your age, which is the most important factor in the whole equation.

A consistent 7% return on financial investments is unlikely to be achievable for 99.99% of people. And you have to consider the rate of inflation in Thailand plus the currency exchange risk in having your assets outside of Thailand.

On the positive side your expected outgoings of 70k / month are very generous and there is a lot of room to reduce them if things start looking not so rosy.

I would recommend

1. Moving a few years' expenses to Thailand, 3.4% tax free interest at the big banks

2. A decent health insurance. The top hospitals provide great service but at a cost.

3. Maintaining the part-time source of income as long as it is possible, keeping the brain active and providing something to do.

Now that is great advice.

Thank you.