How Much Dosh Needed To Retire At Age 50?

[bmanly]

You still seem to be ignoring the FX risk. If I can paste my reply to one of your messages on an earlier thread:

QUOTE(bmanly @ 2006-04-02 05:59:48)

My opinion is, why invest at 5.15% with BBL for a 10 Month term when you can invest in an at call account in a farang country like Australia or New Zealand and get 5.5%? I came back from NZ last week, the banks there were offering 7.4% on a 90 day term and 8% on a 2 year term which is even better. Of course for Thai Nationals they might not have a choice.

Hmm...if you'd bought THB 1m worth of NZD at the end of last year at 28.08, popped it in a 90 day depo at 7.40% and brought it back to THB at the end of last month (at 23.96), you'd have made a whopping...er...loss of THB 131,154! Similarly you'd have lost THB 65,000 doing the AUD trade at 5.50%. Those rates are the interbank rates as well; you'd never get near that in the retail FX market.

This is what so many people don't understand. Future FX fair-rates are simply a function of interest rate differentials. As soon as you transfer funds out of your "home" currency you're taking a punt on the FX; you might get lucky, but that's all it is.

If you really wanted to fully hedge yourself against adverse future FX movements, you'd basically have to either enter a forward FX trade, or buy an option. Guess what? The cost of those hedges will effectively bring you back to square one. Why? Because that's what interbank traders do day-in and day-out - whittling away at any fleeting arbitrage opportunity...

In short, if you are spending money in THB, you are better off saving in THB.

You are of course 100% right, but all farangs living from their retirement money or pensions or incomes from home are in the same boat. We are all taking the risk, all of us from all countries are open to the same risk and some have no choice but to get income from "home". Lets face it if any farang currency devalued by say half most of us would be forced to leave Thailand or just live a lot more frugally. I personally don't chop and change I'm all the way with the AUD as I am an Aussie and I understand my Countries financial system better than any others, invest in what you know, cheers and thanks.

[Gary A]

I had my entire nest egg in the stock market until February of this year. My stocks did VERY well. I got nervous in February and sold everything I had. At my age a bird in the hand is better than two in the bush.

I now have about 70 percent in closed end funds. They sell like stock so they have no huge fees for the managers. I enjoy monthly dividends and the four funds average over nine percent return per year. For anyone interested they are PTY, PFN, PHT and IGD. They have a low BETA (volatility). Even at that I have a stop loss set at 15 percent from the purchase price.

Just something for the Nervous Nellies like me to think about.

[Losangels]

I had my entire nest egg in the stock market until February of this year. My stocks did VERY well. I got nervous in February and sold everything I had. At my age a bird in the hand is better than two in the bush.

I now have about 70 percent in closed end funds. They sell like stock so they have no huge fees for the managers. I enjoy monthly dividends and the four funds average over nine percent return per year. For anyone interested they are PTY, PFN, PHT and IGD. They have a low BETA (volatility). Even at that I have a stop loss set at 15 percent from the purchase price.

Just something for the Nervous Nellies like me to think about.

What is PTY, PFN, PHT and IGD? Name of a mutual fund in the US?

[Gary A]

They are technically stocks. They sell on the US stock exchange. They are closed end which means that they start out with a fixed amount of money so they are worth that amount of money throughout their life span. They don't go up and down like a stock does. They are not allowed to grow so they are required to pay out the profits to the stockholders. They typically deal in bonds. Sometimes some of those bonds are junk class but since they have so many it is not likely many of them would default at least at the same time. Those bonds pay a high rate of interest. They also borrow money at a cheap interest rate and loan that money out at higher rates. If all the bonds would default at the same time they would be in trouble. Since they pay dividends monthly, very many defaults would show up pretty quickly. Some of them are global so the dollars is protected as far as currency fluctuation. They collect those payments in foreign currency. You must buy from other stockholders since there are no new shares available.

Type the symbols into Google and you will find the link to see them. I use Yahoo financial.

I had my entire nest egg in the stock market until February of this year. My stocks did VERY well. I got nervous in February and sold everything I had. At my age a bird in the hand is better than two in the bush.

I now have about 70 percent in closed end funds. They sell like stock so they have no huge fees for the managers. I enjoy monthly dividends and the four funds average over nine percent return per year. For anyone interested they are PTY, PFN, PHT and IGD. They have a low BETA (volatility). Even at that I have a stop loss set at 15 percent from the purchase price.

Just something for the Nervous Nellies like me to think about.

What is PTY, PFN, PHT and IGD? Name of a mutual fund in the US?

[youthnasia]

bmanly, you have quoted the 2004/05 Australian tax rate table as a resident. Here is the 2005/06 table which is slightly different.

Taxable income Tax on this income

$0 – $6,000 Nil

$6,001 – $21,600 15c for each $1 over $6,000

$21,601 – $63,000 $2,340 plus 30c for each $1 over $21,600

$63,001 – $95,000 $14,760 plus 42c for each $1 over $63,000

Over $95,000 $28,200 plus 47c for each $1 over $95,000

A BankWest Internet account is currently giving 6% interest for the first 12 months. So let me get this clear, you only need to pay 10% tax on your interest for term deposits, internet accounts, Mortage and property trusts if you claim to be a non-resident....and that's it? If that's the case then what is the following table used for for non-residence.

Taxable income Tax on this income

$0 – $21,600 29c for each $1

$21,601 – $63,000 $6,264 plus 30c for each $1 over $21,600

$63,001 – $95,000 $18,684 plus 42c for each $1 over $63,000

Over $95,000 $32,124 plus 47c for each $1 over $95,000

Source: http://www.ato.gov.au/individuals/content....ntent/12333.htm

Being Australian and planning to move to Thailand soon, this is of great concern. The tax calculations can be very confusing....for me!

some points to make .

I have a mortgage with a Bank ( commercial ) and I am paying them 6.85 % , I do not think 6 % on deposit is possible !

Idem with shares, look more for 4-4.5% yield on your stocks, that is conservative , I am not talking about company as Telstra / multiplex .

Ion use to give a very very good dividends .

Idem with non resident the tax have no tax-free threshold for them ! and the rate is higher

Taxable as the 10 % mentioned !

‘ Non-residents are taxed at a higher rate and are not entitled to a tax-free threshold. Part-year residents may be entitled to a part-year tax-free threshold ‘

Source : http://www.ato.gov.au/default.asp?menu=40

You are incorrect simcity. Easystreet Internet Account gives you 5.65% on your deposits, at call everyday, that is pretty close. Then there also Bonds that can pay up to 8%. Take a look at Australian Secured Investments. Considering Easystreet is a Credit Union and safe and Ausec is a prudent 1st. Morgage only lender it would be wise to put your cash in 80% Easystreet and 20% into Ausec. That is a very safe investment and would return about 6%.

Secondly there are still quite a few companies offering 6% or near it on the Australian Stock Exchange. TLS 8.4%, TAH 5.5%, WES 5.5%, IFM 5.3%, MAP 7%, IOF 7.3%, DRT 7.4%. The last 3 are property trusts and the dividends are not fully franked. It would not be hard to create a portfolio of mixed shares and property trusts to give you a solid 6% return. All of the above quotes are off the Comsec site as of this morning.

About the tax, you are correct that non residents do not get the Tax Free threshold, however you are wrong about the 10% tax on interest payments for non residents, that is what it is. Here is the link from the ATO: It is very handy to the guys who live in Thailand pernamently to become non residents. Lets Work it out, if you have lets say 100K income from interest per year, on the 10% non resident tax you pay 10K that's it. Now lets say you were classed as an Aussie resident, you would pay:

0 to $6,000 = 0

$6,001 to $21,600 = $2,652

$21,601 to $58,000 = $10,920

$58,001 to $70,000 = $5,040

$70,001 to $100,000 = $14,100

My source for tax rates ATO.

The total tax to be paid by an Australian Resident for $100,000 interest income would be $32,712. Taking that into consideration you would be far far better off declaring yourself to be a non resident wouldn't you agree?

[simcity]

youthasia

I think to park own hard cash into a internet account and buy some shares looking first at yield is risky, Telstra lost a good portion of capital this year! and will not be surprise to see a drastic reduction of dividend next year !

i live in Thailand too , still have business ( rental ) and house in Australia , i did look for register myself as a non resident , but after consideration i did not !

After a number of years you will loose some capital gain advantage !

Before you do anything hasty go to see your accountant and ask him to double look at it! i did not know the 10% of tax on interest only was for a non resident !

i did think it was only for non Australian / non resident !

i am paying as i said a very good rate ( commercial ) of 6.85% , you told me peoples can get 6 % , that give only .85% to the bank , hum where is the catch ! normally it is 1.5 to 2 %

Anyway work hard and place safe with your money! I stay with the Tax Free threshold everyday ! I did not understand why the poster said to be a non resident and put a different table too for tax .

[stevehaigh]

Penalty-Free Early Retirement Withdrawals Calculator

http://personal.fidelity.com/global/search...l?question=sepp

[Thaiquila]

Penalty-Free Early Retirement Withdrawals Calculator

http://personal.fidelity.com/global/search...l?question=sepp

This is a good tool but I would still suggest at least an initial consult with an IRS enrolled agent, because if you get it wrong, the IRS is brutal about enforcing IRA withdrawal rules, and this area is complicated. So, you could go along for years and then get an audit and owe back penalties and interest, cheaper to pay for a consult.

From the Fidelity site:

The Substantially Equal Periodic Payments (SEPP) calculator is intended to serve as an informational tool only and should not be construed as legal, investment or tax advice. Please consult with a tax advisor or investment professional about your unique circumstances.

Results from the SEPP calculator are only as valid as the information that you provide. Therefore, Fidelity Investments does not guarantee the accuracy of the results. Please carefully verify the accuracy of all the information you enter.

[bmanly]

Being Australian and planning to move to Thailand soon, this is of great concern. The tax calculations can be very confusing....for me!

You are not wrong about that. I am not a tax consultant or a financial advisor but I have been a self funded retiree for 5 years and I manage my own affairs 100%. You can go around and around in circles trying to find "straight and simple" answers on the ATO website. As simcity suggests I would see a good accountant before doing anything.

What I do know is that an Aussie expat mate of mine who has been living in Thailand for 17 years has taken the route of declaring himself a non resident. He does not require to ever do tax returns and only invests in fixed interest and fully franked dividend paying shares. You can not ignore this page on the ATO website.

In my personal case I am doing exactly what I posted originally and my return far exceeds the 6% that I quoted. That is because my shares have done very well and the income from them have kept pace with inflation. I chose 6% income as a minimum in conservative investments. To ignore buying good quality stocks that pay good dividends can be a big mistake, however the crash of 1987 is still very vivid in my mind but that's another story.

Simcity, the Bankwest deal at 6% is an introductory offer that they give you for 12 Months. After that it goes back to 5.5%, still not bad. I usually put everything on the table when I get home after my 6 Months in Thailand and see if there is any better offers around. I did the Bankwest deal for 12 Months then pulled the lot out and went somewhere else. Bank margins along with intense competition from overseas banks have seen their profit margins squeezed. Banks making 1% from borrowing from me and lending to someone else is still pretty good money for doing nothing particularily when they do it with millions of $ of other customers money too, cheers.

[simcity]

bmanly

in your page

http://www.ato.gov.au/businesses/content.a...htm&page=14&H14

are you sure it do not mean : Pay As You Go ?

you need to paid every three month some tax ( 10% ) and at the end of the year still have to lodge a tax form ? abd see if you have a double taxation with the country you are in? if not you will need to paid tax at the table show before ?

Edited April 20, 2006 by simcity

[bmanly]

bmanly

in your page

http://www.ato.gov.au/businesses/content.a...htm&page=14&H14

are you sure it do not mean : Pay As You Go ?

you need to paid every three month some tax ( 10% ) and at the end of the year still have to lodge a tax form ? abd see if you have a double taxation with the country you are in? if not you will need to paid tax at the table show before ?

I am not sure 100% of anything but death and taxes but as I mentioned before the ATO site can keep you running around in circles. Everytime I search something another page pops up with more info. The following quote from this ATO page might answer your question.

"If you are a non-resident of Australia, you will only need to lodge a tax return if you have income that is taxable in Australia. This excludes any income from which non-resident withholding tax has been deducted. Examples of income that may be subject to non-resident withholding tax are bank interest and unfranked dividends."

The above statement tells me that if you have non residents tax deducted at 10% then there is no need to lodge a tax return which means you only pay 10% on your interest income. That is what my mate does, however in your case with property and a business in Australia it might be a different ball game. Bloody confusing isn't it.

Now Thaiquila, you had to ask, now we have hijacked your thread, sorry.

[Thaiquila]

I am happy that the thread is being kept alive by people from different nationalities. Many of us have the same goals, but the specifics of getting there don't apply to everyone.

[kc-phil]

They are technically stocks. They sell on the US stock exchange. ...You must buy from other stockholders since there are no new shares available.

Could i buy them through a regular brokerage account at Schwab or would i have to go directly through the companies who manage them?

[Gary A]

I buy them through LPL Financial. I would think that any broker could buy them for you. They may even suggest some better ones than I have.

They are technically stocks. They sell on the US stock exchange. ...You must buy from other stockholders since there are no new shares available.

Could i buy them through a regular brokerage account at Schwab or would i have to go directly through the companies who manage them?

[Gary A]

Here's the link I use to pick my closed end funds;

http://www.etfconnect.com/select/rank/default.asp

If you put in the symbols the fund will come up and you can see a lot of information including the dividend history.

[stevehaigh]

Penalty-Free Early Retirement Withdrawals Calculator

http://personal.fidelity.com/global/search...l?question=sepp

This is a good tool but I would still suggest at least an initial consult with an IRS enrolled agent, because if you get it wrong, the IRS is brutal about enforcing IRA withdrawal rules, and this area is complicated. So, you could go along for years and then get an audit and owe back penalties and interest, cheaper to pay for a consult.

where would i find such a person in thailand?

[Thaiquila]

Penalty-Free Early Retirement Withdrawals Calculator

http://personal.fidelity.com/global/search...l?question=sepp

This is a good tool but I would still suggest at least an initial consult with an IRS enrolled agent, because if you get it wrong, the IRS is brutal about enforcing IRA withdrawal rules, and this area is complicated. So, you could go along for years and then get an audit and owe back penalties and interest, cheaper to pay for a consult.

where would i find such a person in thailand?

I don't know, but if you can't, you can get a reference from a friend in the US and then get a consult by email and phone. I haven't done this yet, but I remember reading there are actually two separate ways of doing this, and you have to stick to the rules of the way you select. The amount you are allowed to withdrawal penalty free varies year to year.

Edited April 24, 2006 by Thaiquila

[tc101]

I voted 20-25M bhat.

Financial planners tend to agree that you can withdraw 4% a year from a balanced portfolio of stock and bond index mutual funds and never go broke. This allows for taxes, inflation, up and down markets and so on. No one knows what will happen in the short run but averages over the years can be predicted.

Assuming the professional financial planners know what they are talking about, 4% of 20 million bhat is 800,000 bhat a year, or 66,000 bhat per month. Most people are comfortable in Thailand on that. Those who are not comfortable on 66,000 bhat per month will need more.

[Mobi]

Penalty-Free Early Retirement Withdrawals Calculator

http://personal.fidelity.com/global/search...l?question=sepp

This is a good tool but I would still suggest at least an initial consult with an IRS enrolled agent, because if you get it wrong, the IRS is brutal about enforcing IRA withdrawal rules, and this area is complicated. So, you could go along for years and then get an audit and owe back penalties and interest, cheaper to pay for a consult.

where would i find such a person in thailand?

The Bangkok/Hong Kong based Englishman who advises me and handles my investments has an American partner who deals with American expat clients in Thailand and the region. I have never met him and don't even know his name, but if he's as good as the English guy then he may be worth talking to.

If you're interested, I'll find out his name and PM the details. Let me know.

[bendix]

I think 20 million is a decent amount.

I'm still working (at 41) and saving like hel_l, but I have a house in NZ which is generating around 30,000 baht a month, and another A$400,000 in a citibank instant access online account in Australia (paying 5.5% on call) which in turn is capable of generating around 50,000 a month. This is all being reinvested and compounding nicely.

I have a savings regime where I am trying to save A$6000-6500 a month. I also have some mutual funds and a small amount in a non-accessible yet australian pension scheme.

At the moment I'm thinking of shifting the A$400,000 over to a 90day term deposit in NZ which is offering 7%. Because of my status, it will not be taxed; instead the interest only will attract a 2% levy.

Why now? Well, the Kiwi has taken a hammering against the Aussie and good investors always buy when assets are cheap.

The moment I can safely generate 100,000 a month from my assets, I'm hanging up the suit for ever.

[warriors]

I think 20 million is a decent amount.

I'm still working (at 41) and saving like hel_l, but I have a house in NZ which is generating around 30,000 baht a month, and another A$400,000 in a citibank instant access online account in Australia (paying 5.5% on call) which in turn is capable of generating around 50,000 a month. This is all being reinvested and compounding nicely.

I have a savings regime where I am trying to save A$6000-6500 a month. I also have some mutual funds and a small amount in a non-accessible yet australian pension scheme.

At the moment I'm thinking of shifting the A$400,000 over to a 90day term deposit in NZ which is offering 7%. Because of my status, it will not be taxed; instead the interest only will attract a 2% levy.

Why now? Well, the Kiwi has taken a hammering against the Aussie and good investors always buy when assets are cheap.

The moment I can safely generate 100,000 a month from my assets, I'm hanging up the suit for ever.

Good thinking, if you shop around you can still get 7.3% on 6 months term in N.Z.

Yep I did it the other way when we got 94 cents per ausy sent $$$$$ over to Ausy now looking at a good return seeing kiwi dropped to 84.2.Also buy into Uranium Shares such as Palidum (Ausy) Petrol is on the up and up. Need different fuels

[xyz]

Penalty-Free Early Retirement Withdrawals Calculator

http://personal.fidelity.com/global/search...l?question=sepp

This is a good tool but I would still suggest at least an initial consult with an IRS enrolled agent, because if you get it wrong, the IRS is brutal about enforcing IRA withdrawal rules, and this area is complicated. So, you could go along for years and then get an audit and owe back penalties and interest, cheaper to pay for a consult.

where would i find such a person in thailand?

I don't know, but if you can't, you can get a reference from a friend in the US and then get a consult by email and phone. I haven't done this yet, but I remember reading there are actually two separate ways of doing this, and you have to stick to the rules of the way you select. The amount you are allowed to withdrawal penalty free varies year to year.

Here's a good starting point for do it yourself Penalty-Free Early Retirement Withdrawals Webpage. I retired eight years ago at 50 and have been withdrawing from my IRA, penalty free, since retirement, using one of the three methods allowed by IRS per Section 72(t). It's not hard to follow if you read up on the requirements at the IRS web site Webpage.

[fanciman]

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

If you continue receiving 67,000 baht a month, you will have more than enough to live comfortably in Chiang Rai. You may prefer to use private medical care, on occasion, which could easily eat your entire lump sum, or take a very large portion of your monthly income, or you could use non-private treatment, which is extremely affordable.

[Steve2UK]

Hmmm - really surprised when I put some figures into the simple retirement calculator to find myself coming so close to the popular THB40m mark (age 56 and looking for as many of 30 years more as I can get).

I'm still in London for a month or so, but then I'm moving to LOS for good. I already researched my sensible living costs for Chiang Mai and got to a figure of about THB55k p.m. - including rent at 15k per month (maybe a tad high, but a safe bet) - or THB660k p.a.

BUT - I reckon on near enough doubling that when I take into account travel/vacation within Thailand, a return trip to UK once a year and about THB200k p.a. "contingency" (medical etc). So - I get to a tad over THB1.1m p.a.

I decided to use a Thai inflation figure of 5.5% - it has already been higher than that this year and before, oil prices show little sign of plunging etc etc. More to the point, I'm really conservative with my choice of assumed exchange rate for my UK£ income (investments and property rental). Last year, when UK£ = 73/74 baht was the norm, I based my figures on a ForEx rate of 65 so as to build in a safety margin. Now, in spite of the recent improvement to nearly 70 after a period at 67, I'm revising my original assumption down to 60 - in the hope that it again provides a reasonable safety margin. The US$ hasn't picked up nearly so well in the last couple of weeks and is generally thought fragile in the short/medium term. If I were reckoning with US$ income, I would base my future figures on US$ = 35 baht - and "knock wood" that it didn't get worse than that.

I'm really amazed that so few people posting in this thread have even mentioned exchange rate in their calculations - surely it has to be one of the main factors in your thinking? 1] Just about everyone expects the Chinese to revalue within the next couple of years; 2] baht follows yuan upwards. Anyone want to bet against that?

With what feels to be a safe and steadily rising London property market and very safe rental income, I reckon I'll be OK and a bit more - particularly as I reckon on selling the London property in about 4-5 years which will coincide with when I'll want to build my Thai house (and therefore stop paying rent) and stash what's left of my London sale proceeds into an investment - plus I'll also get the pathetic UK state pension 5 years after that. BUT - I now realise that the "bit more" is not as much more as I'd been fondly imagining.................

Gets me thinking that quite a few others may benefit from another look at their finances.

[Thaiquila]

A way to hedge currency risk is to buy a condo. Then your housing cost is minimal and locked in, you have a guaranteed good return on your invested capital (free rent), and you are somewhat hedged againt baht strenghtening.

[Steve2UK]

A way to hedge currency risk is to buy a condo. Then your housing cost is minimal and locked in, you have a guaranteed good return on your invested capital (free rent), and you are somewhat hedged againt baht strenghtening.

Maybe - if I were willing to live in a condo and if the building stayed unusually well maintained (by Thai standards) and if there were decent re-sale potential. Not for me............. but the same applies to a house, I guess.

[Mobi]

A way to hedge currency risk is to buy a condo. Then your housing cost is minimal and locked in, you have a guaranteed good return on your invested capital (free rent), and you are somewhat hedged againt baht strenghtening.

Maybe - if I were willing to live in a condo and if the building stayed unusually well maintained (by Thai standards) and if there were decent re-sale potential. Not for me............. but the same applies to a house, I guess.

Well, my view may be a bit over the top, but I reckon that if you have enough dosh to live in England well above the poverty level, including owning a house and car outright, and allowing for inflation, then you you should be allright (OK more than allright) in Thailand. Anything much less than this, then I'd really worry about what may happen in years to come - the Baht revaluing, hyper inflation etc etc. If push comes to shove - and God forbid it ever did - I could jump ship and go back to England.

Incidentally I agree with what Guesthouse said on this or another similar thread - wise words.

I also think that if you've got enough dosh, you can be slightly more adventurous with some of your portfolio and push up that annual return way above 4% - but you must be careful.

[elGrande]

100 Million Baht MINIMUM

Invested outside LOS in Euro, Yen, GBP and a few green backs.

[Gary A]

How much? It's simple to figure out if you have the correct information;

First you have to know how long you are going to live. You must also know how much the various emergencies are going to cost you. From that you can determine how much you will need every month.

You must compensate the amount per month for the currency exchange and the inflation rate and you must know what the life long return is going to be on your investments.

How hard is THAT!

[backflip]

As Gary A posted, there are a lot of questions to ask yourself. I retired 2 years ago with THB60M. Fortunately, my investments have paid off, and I've accumulated a lot more than I spent. Of course, if you're a spendthrift with poor business acumen, your mileage may vary. The question now...is THB70M enough?