My husband and I talk often about early retirement. I guess for people who have spent already quite a long time working, this is a common wish.
Early retirement for us meant not having a 9-5 job in our early 50s and that is around 15 years from now. So in 15 years, we need to have accomplished a lot of things mostly in the financial department to get a good start. Life expectancy is 90 years old so the budget should suffice until then. I am also not counting on some help as I do not want to burden my children, if there would come any.
I already run some numbers and here are what we would be needing to have a good retirement. Our retirement fund should cover at least 40 years for 2 people. Here are some of what I think we would need to prepare.
1. An own, comfortable house. (Very Important!)
We would probably be living in an island in the Philippines and there are big things to consider to be able to live a comfortable life. Namely;
a. Electricity. In Switzerland, I only pay about 20,000 pesos for a year in electricity. It is unimaginable that in the Philippines, my parents electric bill is around 5,000 pesos per month. This would be acceptable IF the service is okay. But from my childhood until now in our town in Masbate, electricity is still what we would call a ‘christmas light’ phenomenon. It means that the power come and go as it pleases in a day. The result is huge electric bill and broken electric appliances.
If we would live in such a place like that, I would want an entire solar powered electricity to rely on. I am thinking of generating our own source of power. This means a big money in our budget though.
b. Water Supply. In Masbate, we still do not have running water. In lots of places in the Philippines, running water is a problem. The bill is huge and the water coming from the faucet look like coffee with cream. To combat this, I would want a functioning deep well that I can connect to our house. This would again cost a chunk in retirement budget.
2. A good and reliable health insurance.
This is very important as just a sickness can completely wipe up an entire savings. I already have some information, although not complete to go about this. There are health insurance that can be purchased for a period of 10 years that covers until 100 years old but they can really be expensive. I checked the premium payments and boy are they more expensive than here in Switzerland.
Another way that I have read is that one can purchase a hospital stock and one can get up to 50% discount depending on how many shares one possesses. A combination of this 2 will be sufficient I suppose.
3. Dividend paying stocks.
I am in Philippines stock market since 2015 and the only consolation I have is that at least, I have a ‘savings’. I made a lot of bad decisions so I have not really made any money.
However, I still have 15 years to build a dividend paying portfolio so I still have time.
I want that I earn enough dividends to be able to cover my monthly basic living expenses. With this I mean, food, transportation expenses, small knick knacks that come daily.
4. Interest in Banks / Bonds.
The interest will just small but I feel that if I have a diverse retirement sources of income, it adds a layer of peace of mind.
It is important that aside from the laid out/ prepared-through-the-years investments, that I still have money in a bank. We would like to be able to travel and visit relatives even if we are no longer working. We also would like to enjoy our non-working years and that means good food and freedom to travel when we like.
This is my ideal retirement fund. Note that the house and health insurance should be already in place on top of these:
Savings Account 3 Million pesos
Stocks 10 Million pesos
Money in Bonds 5 Million pesos
- Savings account will be withdrawn per year for the next 40 years and that would be 75,000 per year.
- Stocks earn a minimum of 6% and that would be 600,000 dividends per year.
- Bonds earn a minimum of 3% and that would be 150,000 interest per year.
Yearly income would be 825,000 per year so that would be 68,750 per month.
The house and the health insurance should already be in place by this time.
I do not know how much will the inflation be in 15 years but in this year, I estimate that for a couple to have a comfortable life in the Philippines, one would need an allowance of 50,000 pesos. (This could very well be 70,000 or 100,000 pesos in 15 years.)
Essentially, I would need to raise a minimum of 20 million pesos in the next 15 years. That would be 380 503,17 in Swiss Franks. It means that we should be able to save at least 25,000 chf per year combined. Up until this point I only manage to save 8,000 per year on my own.
However, I am just writing down my thoughts. This numbers are more or less true but a lot of things can happen along the way. My husband and I are only thinking about early retirement because we have a physically demanding job here in Switzerland and so we dream of just being able to be free and just do whatever we want.
Retiring in the Philippines is doable if we could save at least this amount. It is of course cheaper to live there than to live here in Switzerland.
However, retiring in Switzerland has also advantages because here, if you have no more money in old age (meaning that you enjoyed your life and did not save when you were still young) then the state will get you into the elderly institution and you have food, health care and shelter for free unlike in the Philippines when if you do not have money then good luck.
Time will tell anyway but it is still better to have at least a target number and a working plan.