Possible to retire with RM1 million or US$1 million?
Many years ago, someone told me that RM1 million is not going to be enough to retire because that’s too little. Actually I think it’s enough because if one lives for another 20 years after retirement, then, RM1 million is around RM50,000 per year or RM4,166 per month. We assume everything stays unchanged in terms of rental. RM1,500 would get us a typical apartment / condo depending on the area. In smaller cities / towns, one could rent a landed home for around the same. Usually the rental is likely to be lower.
This brings us to the remaining amount. RM4,166 minus RM1,500 = RM2,600. Assuming 50% of it will be spent on food. That’s RM1,333 or RM44 per day for breakfast, lunch and dinner. Can lah… Even if RM8 per bowl of noodle plus a cup of kopi-O kaw kaw. Occasionally, roti telur and teh tarik. Beyond food, we still have RM1,333 for all other things. I do not imagine us still paying for a brand new car instalment after retirement or we still have to support the children after retirement. So, perhaps pushing for that RM1 million savings is still okay, at least for now.
Can someone retire with US$1 million then?
Someone also told me that RM1 million is not the same as US$1 million. Well, first of all, it is definitely not the same because we do not live in the US. We live here. As for the Americans, they also live in the US and they do not live here. After retirement, I am very sure most of them would move to cheaper cities too. This will stretch their retirement dollars way further than if they were to continue staying in New York city for example. As per information from renthop.com (click here), the below is an image showing the median price for a Studio apartment or a 1 bed room apartment. it ranges from US$2,595 all the way to US$3,150. (Median price).
We assume it’s okay to stay in a studio versus 1 bedroom apartment. So, it’s US$2,595 x 12 months x 20 years = US$622,800. This meant that out of the US$1 million we spoke about, if we assume the person does not want to move to a cheaper city or town, then he / she would only have US$1 million minus US$623k = US$377,000.
Using the same rationale, we use half of the amount for food. That’s US$189,000 or US$US$9,450 per year or US$788 per month. It’s US$26 per day. One Big Mac Meal is roughly like a bowl of noodle here in Malaysia in terms of number. It’s US$7.60. (Info here) If I assume this is the typical price for one course, then US$26 is enough for three meals too. Just need to note that the flexibility would be lower versus the same person in Malaysia simply because of the cost of accommodation.
The above comes with assumptions yeah
We assume food price stays almost the same. We assume rental does not change much. We assume we do not get any returns from our investments. We also assume we only have the occasional fever and headaches and have no major medical related complications. Hopefully we are already protected with medical insurance. One plus point is that treatment at General Hospital remains accessible to any Malaysian. We also assume the person continues to stay in the city versus moving to a smaller city and town. If we moved to a cheaper place, of course our money could be stretched even longer.
Conclusion is simple. RM1 million or US$1 million is enough to retire on
As long as we do not overspend, I think it will be just fine. Remember yeah, if the home we are staying is already ours, then take out all the rental in the calculations above and we realise that we suddenly do have the flexibility to also travel more whether within the country or occasionally outside the country. This is why when people say it’s best to rent and not buy, remind them that renting is forever. One does not stop paying rental just because one has retired… As an owner, I would also not be telling my tenant to stop paying me just because he has paid me rental for the last 30 years. Happy understanding.
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