How Much Dosh Needed To Retire At Age 50?

[Thaiquila]

OK, I know there are a lot of early retirees and retire in Thailand wannabes on TV.

So, if you totally cashed out and had NO PENSION at age 50 today, how much money do you think you would you need to retire in Thailand and maintain a pleasant life?

For the sake of the survey, assume this pile of cash needs to cover a purchase of housing (and optional car) or housing rental.

Also, consider, alot of the money would still be invested and hopefully earning returns.

Of course, some people would still be expecting a pension to kick in at a later age ... so that kind of makes it hard for this to be totally objective.

Edited April 15, 2006 by Thaiquila

[PeaceBlondie]

Thaiquila, if we can guess the interest rate and number of year this fund will take to exhaust itself, then any Excel spreadsheet can be used to compute the present value.

For example, if we say a person needs 0.8 million baht (same as one of the visa requirements for retirement income) per year, for 35 years, dying at age 85.

The formula is =PV(RATE,PERIODS,BAHT). 800K per year requires 10.3 million baht to fund at 7%. Insert rate as 0.07, so it's =PV(0.07,35,800000). Use no commas on the baht amount.

Now I would know what to choose for the poll, ten million, if only I could live on 67,000 baht per month. I actually spend a third more than that, so I'd need 13.4 million baht.

I spent a lot of time between ages 55 and 56, computing this, with each one of my pensions kicking in at different ages, etc. Then I got the H.ell out of Dodge (I quit the IRS). The pension calculations themselves were as difficult as any income tax computation I ever did.

[Kruang]

I'm sure this rings a lot of bells with everyone who has sweated in front of the computer trying to make the numbers work without the requirement for a premature death

It is indeed a difficult calculation, but perhaps even more complex than you suggest. A few points I've had to wrestle with:

1. When you move to Thailand, the costs of getting set up are considerable (as Thaiquila mentions). Probably a house purchase -- very likely in cash; transportation (likely at least the down payment on a car; then the monthly payments); and in many cases a wedding. I can say that my startup costs in Thailand were in the order of 4 million baht. That takes a real chunk out of the funds currently invested.

2. When you finally expire at 85 you probably don't want the cupboard to be bare. Probably your young wife is still around (what? you didn't marry a girl at least 15 years younger than you?); you may have also have some offspring who deserve a chance at a decent life.

There are probably other things that I'll remember only in the wee hours (in a cold sweat). I have never had to budget as carefully as I have in Thailand, and it's so difficult to anticipate all the expenses that suddenly appear. But at least the house is almost done and maybe the surprises will come less often .....

Thaiquila, if we can guess the interest rate and number of year this fund will take to exhaust itself, then any Excel spreadsheet can be used to compute the present value.

For example, if we say a person needs 0.8 million baht (same as one of the visa requirements for retirement income) per year, for 35 years, dying at age 85.

The formula is =PV(RATE,PERIODS,BAHT). 800K per year requires 10.3 million baht to fund at 7%. Insert rate as 0.07, so it's =PV(0.07,35,800000). Use no commas on the baht amount.

Now I would know what to choose for the poll, ten million, if only I could live on 67,000 baht per month. I actually spend a third more than that, so I'd need 13.4 million baht.

I spent a lot of time between ages 55 and 56, computing this, with each one of my pensions kicking in at different ages, etc. Then I got the H.ell out of Dodge (I quit the IRS). The pension calculations themselves were as difficult as any income tax computation I ever did.

[Boon Mee]

Thaiquila, if we can guess the interest rate and number of year this fund will take to exhaust itself, then any Excel spreadsheet can be used to compute the present value.

For example, if we say a person needs 0.8 million baht (same as one of the visa requirements for retirement income) per year, for 35 years, dying at age 85.

The formula is =PV(RATE,PERIODS,BAHT). 800K per year requires 10.3 million baht to fund at 7%. Insert rate as 0.07, so it's =PV(0.07,35,800000). Use no commas on the baht amount.

Now I would know what to choose for the poll, ten million, if only I could live on 67,000 baht per month. I actually spend a third more than that, so I'd need 13.4 million baht.

I spent a lot of time between ages 55 and 56, computing this, with each one of my pensions kicking in at different ages, etc. Then I got the H.ell out of Dodge (I quit the IRS). The pension calculations themselves were as difficult as any income tax computation I ever did.

Good advice, Blondie.

What folks forget is the 'nominal' rate of withdrawal from your 'pot' can't be more than 4.5% or you'll run out of money at say age 85. Sure, you're lible to spend less as you get more infirm but on the other token, medical costs will increase and there's no Midicare in LOS!

BTW - liked your previous avatar better...

[ilyushin]

Baht 40 million plus. Can't see retirement at 50 in any country for less.

Edited April 15, 2006 by ilyushin

[PeaceBlondie]

Boon Mee, you're the second one to prefer the previous avatar, but I replaced it with the mythical cartoon-type character who never grows up.

Kruang, you're so right to point out the initial capital investments that one typically makes upon retirement, especially a family man. Of course, a house that's built or purchased for cash then has no monthly payments for rent or mortgage.

Suggestion: start with that lump sum, in today's money, for the capital investments and inheritances. Then make your best estimate of your monthly needs, and use that formula. However, I shouldn't have used 7% in my formula; the normal gap between investment return and the effects of iinflation only gives you 4%, which makes a big difference. You'd only make 7% after inflation if you invest billions of baht, like a certain somebody can.

Interest compounding of 4% (allowing for losses due to inflation) for 35 years for 110K baht/year of expenses, comes to more than TWENTY million, not 13m. The magic of compound interest is far more magical above 6% than it is below.

[GuestHouse]

How long is a piece of string?

I know people retired in Thailand on a fund that I would not be able to sleep nights through worry. They seem to be as happy as Larry.

There are two problems I see with retiring on the minum visa requirement.

1. What happens as inflation eats in to your lifestyle.

2. What happens if you settle with a younger woman and along comes the younger woman's needs.

I take the view, retire in Thailand on what you need to retire back home and live very much better in Thailand, with the option, because you can afford it, of going elsewhere if the need arrises.

[lordofdelusion]

This is a common thread, which is dear to my heart as I turn 50 this year and head to Thailand. And yes I have a girlfriend who is 15 years younger than me, and yes I have stayed awake figuring and calculating. ######, I am so common. I thought I was unique

Anyway, for me financial planning is an oxy-moron. No such thing. Who knows how long you'll live, what the inflation rate will be, how your investments will perform, medical calamities, the accidental offspring, tsunami, locusts, etc; I am coming over with about 23 million baht in a well diversified portfolio. Social security will kick in at some point and if things look bleak I can always return to work. So take a chance. Better to be where you want, doing what you want, than being miserable while adding to your wealth back home. Life is indeed short.

[Thaiquila]

Interesting discussion, which is of course is what I was aiming for in the poll.

There are so many variables such as what you consider a "pleasant" or "adequate" level of living. I have to disagree that you really need to have saved as much as needed for a western retirement IF you have really made the committment to settle in Thailand. If it doesn't work in Thailand, there are other lower than western cost retirement destinations.

People really looking into this should play around with the myriad retirement calculators available on the web and with companies like vanguard and fidelity.

Here is a real simple one:

http://www.banksite.com/calc/retire

Another point I think people are missing is that in general, the standard suggestion is to START at a low rate of withdrawal and then steadily increase the withdrawal to account for inflation. Using the simple calculator above will show how this works quite graphically. This way you account for both the rate of inflation and the expected return on investment. Over history, equity investments have returned in the 10 percent range (though I wouldn't expect that in the future or suggest that you put 100 percent in equities).

In my case, retiring at 50, I do expect social security to kick in at age age 63 if I make it to that age, and this expectation definitely means for me that I feel I can retire with less money than if I didn't have that expectation.

Edited April 15, 2006 by Thaiquila

[PeaceBlondie]

TQ, if you're much under 50 now, don't plan on SS. Don't even plan on it.

The 4% present value formula that I suggested will factor inflation into it. I disagre that for future planing 10% isn the benchmark or the correct historical return; that's skewed by the boom of the 1990's. Discarding such 'outlyers.' the historical amount is no more than 7.9%, and the rate of inflation is about 3.9% - anyway, a margin of a net 4%.

The trick is to make a combination of a pension (or equivalent income from investments or annuities) and a lump sum that you've saved up and invested. If your employer or nation doesn't guarantee you a pension, invest in one privately, such as IRA's.

I'm living comfortably here mostly because, for the last 12 years that I worked, my employer and I were contributing amounts totalling 25% or more of my current salary toward my retirement.

So, just live on half your gross income, or less, regardless, until you retire.

[Thaiquila]

Hi, PB.

I absolutely agree that I wouldn't count on 10 percent, but actually those studies go back at least a 100 years. Also, if you are so unlucky as to be largely equity invested AND you hit a stock market crash EARLY in your retirement years, you are basically SOL! So, personal TIMING and indeed LUCK, does make a difference. There were indeed millions of people hit by the most recent stock market crash after the boom who did indeed have to delay or cancel their retirements.

Regarding social security, I am almost 50, and while I agree with you that current day 30 year olds are in a new world, I would bet the house (better to say I have bet the house) that the social security system will be intact and paying benefits to people my age, though perhaps with some likely tweaks, such as clever formulas to reduce the payouts and raising of the age to receive full benefits. Why do I think this? Two reasons, social security is ingrained in the modern American way of life. Bush tried to attack it (some would say reform I know) and he got nowhere. The USA has a much younger population than Europe, so there actually will be a large enough pool of younger workers to support the system.

Edited April 15, 2006 by Thaiquila

[Khun Nancy]

Here is a question for you?? Say you are already collecting 67,000 baht per month and have about 800,000 baht banked. Could you survive? That is my income for the about 8 years, then the IRA's & mutual funds will kick in.

And, yes, i am over 50. Since i am used to living (struggling that is) on the limited income in the States, i would think there would be room for me to save a little each month. Have i lost it? I'm considering Chiang Rai. What do you think? I am not planning to purchase a home right away. I saw some rentals in Chiang Rai that appear affordable.

Advice please. Thanks, Nancy

[Thaiquila]

Here is a question for you?? Say you are already collecting 67,000 baht per month and have about 800,000 baht banked. Could you survive? That is my income for the about 8 years, then the IRA's & mutual funds will kick in.

And, yes, i am over 50. Since i am used to living (struggling that is) on the limited income in the States, i would think there would be room for me to save a little each month. Have i lost it? I'm considering Chiang Rai. What do you think? I am not planning to purchase a home right away. I saw some rentals in Chiang Rai that appear affordable.

Advice please. Thanks, Nancy

Hi Nancy,

I certainly could but clearly not everybody could. If you have a history of being able to live within your means, I don't see a problem.

Another point that alot of people do not know. You can indeed start withdrawing from your retirement accounts before age 59.5 without any penalty. You still, of course, are tax liable for the amount of withdrawal. To do the penalty free thing, you do need expert tax accountant help at least one time, to figure the percentage you are allowed (based on IRS life expectancy tables), which increases annually. If you start this program, you must continue the withdrawal program every year, or be liable for all back penalties. Worth a look as an option.

[cobra]

The best laid plans can go out the window with the uncerntinty of two varibles:

Health, Lifespan,

Actually, lets let the old Rummy explain it,

"Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don't know we don't know"

Donald Rumsfeld

[Guest endure]

Are annuities popular/much used in the USA? All the talk I read of US pension plans seems to imply that they aren't as there's always the mention of running out of money if you live too long. Here in the UK annuities, until very recently, were compulsory for those with pension plans who reached the age of 75.

Edited April 15, 2006 by endure

[Thaiquila]

Annuities are certainly not compulsory in the US. It is being much more common for Americans to have NO pension from their employer at all. Thus, most are left to cope with a combination of savings in taxable investment accounts, savings in tax deferred retirement accounts (self funded 401Ks and IRAs), and social security (government pension). Some people do purchase annuities privately, of course, I don't know how popular they are.

Edited April 15, 2006 by Thaiquila

[PeaceBlondie]

Right, Taiquila. By the way, other than a partial payout of a TSP fund, which is a different type of employer plan than an IRA or a 401(k), I'm not aware of a non-penalty clause for payouts before age 59.5, except maybe total disability. The formula you're referring to sounds like the one for people at the opposite end, who fail to withdraw funds in advanced old age.

But hey, if you're almost 50, then you're going to collect SS, which is why I said "much under 50, don't count on SS." I agree, that people born by 1960 are only going to be tweaked by say 2 years and 10% if the cowards in Washington ever have the nerve to get off the train tracks before the speeding locomotive arrives. My son born in 1968 will need his MBA-Economics and his computer background and his existing company's pension, because SS may only be 15% of his total retirement income.

Khun Nancy, I think you should be able to live reasonably comfortably in Chiang Rai, assuming no luxuries and no excessive habits with cigarettees, alcohol or partying. 67,000 baht retirement income and 800K would do fine, unless you have a life-threatening accident or disease, in which case you might run short.

TQ, haven't we met somewhere before?

[Kruang]

Right, Taiquila. By the way, other than a partial payout of a TSP fund, which is a different type of employer plan than an IRA or a 401(k), I'm not aware of a non-penalty clause for payouts before age 59.5, except maybe total disability. The formula you're referring to sounds like the one for people at the opposite end, who fail to withdraw funds in advanced old age.

.......

If you're an American or have funds in an IRA in the US, there is a straightforward way to receive non-penalty distributions from your IRA before the age of 59.5. The program is called SEPP (Substantially Equal Periodic Payments). Basically you set up regular equal distributions from your IRA that you must continue for 5 years or until the age of 59.5 (whichever is longer). Note that you can only do this from IRA accounts, not from 401(k).

I've done this and it was very easy to set up through my brokerage firm. If you have multiple IRA accounts you can set up distributions from one or more accounts, so you can set your income level where you want it (and minimize income taxes).

This is really something that any American taking early retirement should be aware of.

[Thaiquila]

Thanks, Kruang.

Exactly right and it is a very cool thing for early retirees. It is a little known fact, probably because most baby boomers are not considering EARLY retirement; instead, they are wondering if they can ever afford to retire at all.

There is a myth these days that baby boomers are "different" and won't want to retire like previous generations. I think this is really overblown.

(Maybe they won't die either.)

I am afraid this thread has gotten to be rather Yankocentric.

Oh well.

Edited April 16, 2006 by Thaiquila

[Kruang]

Thaiquila, you've got an interesting take on baby boomers. I feel I never really 'worked' in my life, so I don't really think of what I'm doing now as retiring. I guess I did have a couple of 'careers', but I only did what I thought was interesting or fun, and when it stopped being interesting and fun (when the bottom dropped out in Silicon Valley) I walked away at the age of 48. At one time I had way more money than I needed, and now I have way less than I would like. Frankly, it's all the same. But living in southeast Asia is something I wanted to do for a long time. There are many ways to make an interesting life here, and having a lot of money to do it is hardly necessary. Follow your dream.

Sorry about the Yankocentrism. I'm not even American

Thanks, Kruang.

Exactly right and it is a very cool thing for early retirees. It is a little known fact, probably because most baby boomers are not considering EARLY retirement; instead, they are wondering if they can ever afford to retire at all.

There is a myth these days that baby boomers are "different" and won't want to retire like previous generations. I think this is really overblown.

(Maybe they won't die either.)

I am afraid this thread has gotten to be rather Yankocentric.

Oh well.

[Thaiquila]

Thaiquila, you've got an interesting take on baby boomers. I feel I never really 'worked' in my life, so I don't really think of what I'm doing now as retiring. I guess I did have a couple of 'careers', but I only did what I thought was interesting or fun, and when it stopped being interesting and fun (when the bottom dropped out in Silicon Valley) I walked away at the age of 48. At one time I had way more money than I needed, and now I have way less than I would like. Frankly, it's all the same. But living in southeast Asia is something I wanted to do for a long time. There are many ways to make an interesting life here, and having a lot of money to do it is hardly necessary. Follow your dream.

Sorry about the Yankocentrism. I'm not even American

Hey, Kruang, errr, thank you ... I think, hmmm, getting called interesting is right up there with "can we still be friends".

Anyway, yes, I know baby boomers including myself have generally had more colorful and varied work paths than previous generations. Any many will want to stay active as long as they have something that interests them. All I am saying is that human biological reality, as in AGING, and BURNOUT, are kind of universal. So unless there is some mysterious long term effect of adolescent pot smoking, I would still bet the baby boomers are going to want to slow down workwise.

Also, the objective reality is that the vast majority of baby boomers have very small retirement savings, but in lots of cases, inheritances and real estate appreciation will save the day.

Hey, I share something with you. I am also a Silly Valley veteran. I meant to work there 10 years longer but I got hit with the same "this is no longer fun" during the so described bottom dropping period.

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REAL QUESTION: To the people who voted that FIVE MILLION baht was enough money to quit work for life at age 50, were you JOKING? I am really curious; if you were serious, I'd like to hear the reasons.

Edited April 16, 2006 by Thaiquila

[Kruang]

As someone said in an earlier post (I think it was lordofdelusion), hey, I thought I was so unique.

It's both reassuring and depressing to find out how many people there are here in Thailand just like you -- they came for the same reasons and they face the same challenges. It really does make it hard to maintain your identity as a free spirit, forging a new path, ignoring conventional wisdom and following your own dream. Now you realize you're just another branch on some enormous baby boomer decision tree. Some day there'll be a feature story in the NY Times on baby boomers who retired early and left for SE Asia, and your family back in the West will finally realize that you're not a complete lunatic. What a sad day that will be.

[Boon Mee]

Are annuities popular/much used in the USA?

They seem to be more popular lately but the catch is one cannot really 'afford' to buy one much before they turn 65 or so because of the cost.

In the end, to retire at age 50 and not take any teaching jobs etc in LOS - my opinion an individual will need the 40 million previously mentioned. 60/40 ratio with equities the larger portion until age 60 or so and bonds after that the predominant. Perhaps a fixed 10-year annuity purchased in your mid 60's.

[nev]

40 million baht you have to be joking most guys on here would not see that in a lifetime.

tit we are talking about and each persons requirments are different.

a modest life style you could do it on 5-10 million baht.

rents is cheap food is cheap and drink and entertainment cheap.

dont waste to much on tg's you would be able to survive untill 65 and the pension will kick in.

i am lucky i am self employed i can do 6 months thailand six months back home on a work stint,and would not need to touch my savings.

Edited April 16, 2006 by nev

[think_too_mut]

I would think, 500K US$ in a bank is a minimum. 750K reasonably comfortable.

With a 5.4% interest (Oz banks are doing that now) compounded daily and paid monthly into your spending account.

[youthnasia]

think_too_mut, are you factoring the tax you would be paying on the interest?

I'm am a 41 year old Australian male with about $600,000 (AUS) in assets and superannuation with a plan to move to Thailand in a couple of years. I find it difficult to understand the tax system and the implications on my investments.

[think_too_mut]

think_too_mut, are you factoring the tax you would be paying on the interest?

I'm am a 41 year old Australian male with about $600,000 (AUS) in assets and superannuation with a plan to move to Thailand in a couple of years. I find it difficult to understand the tax system and the implications on my investments.

The tax is there,that's all I know. Still, at that level of income the tax would still allow you to live reasonably comfortably in Thailand.

What gives? a 60K baht per month (2K AUS$) would be taxed by 12%? Or what?

Long time since been Down Under.

They don't touch my Japanese income, Oz and JP have a deal - single taxing.

[Boon Mee]

40 million baht you have to be joking most guys on here would not see that in a lifetime.

Remember we're talking about a 50 yr. old individual who does not intend on working again. Inflation - as mentioned before, is the killer and with life expectencies getting longer, 40 mil isn't that extreme. The 50 yr. old could have another 40 years ahead of him in retirement.

True enough, each persons requirements are different as you've pointed out but it's better to err on the side of too much than too little.

[Thaiquila]

40 million baht you have to be joking most guys on here would not see that in a lifetime.

Remember we're talking about a 50 yr. old individual who does not intend on working again. Inflation - as mentioned before, is the killer and with life expectencies getting longer, 40 mil isn't that extreme. The 50 yr. old could have another 40 years ahead of him in retirement.

True enough, each persons requirements are different as you've pointed out but it's better to err on the side of too much than too little.

OK, I strongly disagree that USD million is needed to retire in Thailand for most people.

Why?

First, most people will not live till 90.

Secondly, I punched these numbers in the simple retirement calculator:

30,000 USD, income on first year of retirement (raised annually)

0 Number of years until retirement (assuming a 50 year old is retiring now)

40 Number of years required after retirement

3 percent Annual inflation rate (outflow is raised based on this)

7 percent Annual Yield on Balance

Total, about 24 million baht.

If you spend another 5 million to set up house and car, you have 29 million baht.

This is more than generous for most people, and this is assuming NO PENSION at a later age.

So for people who can live on less than 30,000 USD in todays dollars, expect they won't live till 90, can spend less on initial setup (or rent instead), the number would go down much more.

I think this kind of thinking, that you need to be a USD millionaire to ever retire is basically scare tactics. In the REAL world, the vast majority of western people never amass that much, and still manage to retire.

Also note, I have read that in general retirees tend to spend the most in the early years of retirement, and then the spending goes way down. Of course, medical end of life spending is another thing to consider.

Edited April 16, 2006 by Thaiquila

[kc-phil]

I'll take 40m!

Better to have too much than not enough.....at some point you lose the option to get more!

Which raises a question that has been on my mind and i have no idea where to bring it up so i'll do so here....

DYING IN THAILAND

I am currently dealing with aging grandparents (both in their mid-80's). They are unable to care for themselves with out familial assitance. One other elderly relative is in a retirement home.

I watch them and i think about the folk who retire to Thailand and i wonder what the plan is when they reach a ripe old age where they can longer take care of themselves. Are there retirement homes over there for us? How many of us actually die of natural causes in SEA?

I am really curious what happens to us in seriously old age over there.

Experiences? Comments?