Property vs Stocks

 Interesting video I watched last night

In the video he mention about S$450k to finance a $1.5mil property versus the investment returns on S$450 invested in stocks. But if I'm a salaried worker and I can afford a $1.5mil property that probably mean I also have a substantial amount of money in my CPF OA account and I need only S$150k in cash + S$300k in CPF. The remaining S$300k I can then invest in stocks. I feel he should just compared S$150k in cash to purchase a $1.5mil condo vs S$150k equivalent in shares....

10-15 years ago I would say as-many-properties-as-you-can-afford all day long, but with the invention of ABSD everything went out of the window. Nowadays I think minimally everyone will need at least 1 property and stocks. If a couple can finance 2 units without ABSD that's all the better. Maximize the number of units one can own without paying ABSD, once that is settled just continue to serve the mortgage and focus excess funds on building stock investments.

I don't believe in all-in on stocks without owning a property because nobody can guess where the rental market is going, and neither can anyone promise anything about the stock market. 20-30 years down the road the returns on stocks might not catch up with the rental increase. Having a roof over one's head is always better. 

In the video it was probably assumed the investor is staying rent-free with family/friends. It will be interesting if he add the following scenarios:

i) Rental income - rental rates in Singapore has increased by 40-50% in the last 10 years. But the calculation is pretty flat in the video

ii) If the investor gets kicked out of his rent-free residence after 5 years. How much will he/she spend on rental (offset with the investment gains) vs taking back his property to stay. 

For someone like me who has children, a roof over our heads is one of the most important and fundamental issue. I see alot of YOLO investors on Youtube sharing about how much you've spent and earn on the stock market. When you dig deeper you realise they are saving 90% of their salaries because they are staying with their parents, no spouse/partner and no kids. 

Damn, kids are expensive! LOL~

Planning for retirement

At this stage of my life, this is the start of my 4th 15-year arc and I have to plan for retirement. Below is a very interesting video from Mr Loo which should help many people with their retirement planning.:

He mentioned the Four Levers of Retirement Income and I breakdown my own thoughts and strategies below:

i) CPF Life (estimated to be S$1.1k when I reach 65)

Having a few properties, I will opt for Basic Retirement Sum (BRS). I rather invest that S$100k myself or spend it. The breakeven point for CPF life between FRS and BRS is around 80yo. I rather invest or spend that money in my 50s and 60s.

ii) Investments (Target $500k with 4.5-5% annual return of $22-$25k/year or around S$2k/mth)

Consistent investment is important and is essential to match inflation. I've been investing around $10k/yr in unit trusts + equities + REITS a year in recent years, but from this year I hope to invest $50k/year. 

The reason why i've not been investing more in previous years? I've been investing in 3-4 holidays with the family. I think at that stage of my life, as well as the age of my kid, it was the best way to spend my money. Investing that money will definitely earn me so much more in the long term but I'm never going to get that travel experience with my kid when he's 100% with us. 

With a bit of self-discipline, I hope to hit my target of S$500k invested in the next 3-4 years. If not I should hit it when I reach 55 when I get that S$100k from CPF.

iii) Property Rental (est S$1k-2k/mth based on 50% of returns based on ownership share of property + assuming still servicing mortgage of S$3k/mth)

Right now I'm servicing mortgages on 2 properties housing my families. There will come a time the family will become smaller and a unit will be available for rental and income will come in. But even without that I look at it as paying cheap rental considering the interest repayment component of the mortgages come up to under S$2k a month. 

I think in Singapore property is a great way to fight inflation but since ABSD and other measures were introduced, the barrier to having a 2nd property for investment is becoming a distant dream.

The target is to pay off at least 1 of the unit in the next 4-5 years and that will be for self-stay while the other unit will be rented out and the rental will cover the mortgage repayment + some income.

iv) Part-time Work (S$1k/mth)

I think part-time work is great not just for the income but also necessary to stimulate our brain. I've heard too many stories of people dropping dead once they retire. Stopping work altogether after 20-30years is like a Ferrari racing at 200kmh and then stopping to 0kmh in 20metres. Even if the car does not hit a wall, the inertia would have caused serious damage to the internal organs of the driver. 

Just targeting 20 hours of part-time work a month = 4-5 hours a week is really do-able for me. Hopefully I am healthy enough to do the things I like when I retire. 

Summary

As long as I can clear the mortgage on 1 of the properties and hit S$500k on my investments, I think I can effectively retire in 4-5 years' time. I will have around S$5k of income and more when I reach 65 and CPF Life kicks in.

But that does not mean I have to retire. If I'm healthy and my job continues to be interesting I will propose to work in a reduced capacity, lower salary and less hours a week. 

In the meanwhile I'll continue to look for other sources of recurring income~

Long-stay options in Singapore for Nomadic Retirement Lifestyle

Two of the greatest assets most people own in Singapore, an HDB or a condo, and a CPF account. If the plan is to retire before 65, then the property is one's best bet for a recurring income to finance the retirement lifestyle. A 4/5-room HDB flat can probably fetch a monthly rent of S$3,000-4,000 easily. 

But if I were to rent out that flat and lead my nomadic lifestyle abroad, I will have to sleep on the streets when I'm back in Singapore... or....