Cory Diary : Retirement Equity Portfolio Size

In my Quest for FIRE, the journey has not been easy but fruitful. Why do i say that is because FIRE aren't the Life Goal. Is the Experience that is key. While is commonly felt Experience got to do with going on holiday, this aren't what I meant. Is too narrow.

Life experience is about family, learning, building, helping, gaming, vacationing etc and FIRE helps to facilitate that. Example the pain and achievement going through NS combat vacation or simply as getting a driver license. Not everyone can go through the same experiences. Some have their own preferences. 

Having work for more than 25 years, thought is time to try and focus on many other stuffs. Formulated ones and those not. One of the hardest thing to let go is that of salary which will be quite sizeable by now and hard to let go mentally. The middle ground maybe trying to reach work life balance. Maybe tilted more away from work on the expense of promotion and increment.

Nevertheless, i thought is time to do another exercise on - Do we have Enough to Retire ?

The angle we will do is to pre-determine the expense and then verify with corresponding Equity Portfolio Size. For a dividend income portfolio, estimating the annual dividend maybe easier. For a growth portfolio, then we need to estimate the growth. For our case, will be both since my portoflio is mixed and probably we can pro-rated them accordingly.

The scenario will be expense is 9k monthly with 3% inflation. Taking into many factors into consideration like age, loan, non-equity income etc we can determine the portfolio size than can last by adjusting the size to our liking for our age to last.

The assumption is non-equity income size is more or less fixed by my age to support basic needs. Expanding this segment on low return can be wasteful unless warchest which can lowered your portfolio amount. There maybe situation where people can live more on non-equity income such as rental. In that case, adjust the Non-Equity side accordingly.

Below a sample computation. Select the picture for clearer view. 1M Starting Portfolio size to support 9k monthly expenses at 3% inflation can last till age 96 for me. There is drawdown of Equity portfolio to zero. There will be some inheritance from some non-equity allocation and property after. Not that bad.

The parameters can be changed to suit ones condition. I tabled few permutations to see how this go.

The finding is quite interesting which I am so keen to share so that people can avoid the danger.

Scenario A and B, just 0.5% inflation difference can set you back 7 years of retirement.

Scenario A and C, for 200k more, you likely have excess after your last breath despite drawdown.

Scenario E, a situation where your children will love you deep deep. Portfolio is divergence. There is no drawdown and probably grow beyond your dream hopefully.

Scenario F, if expense go out of hand and inflation increases too. Portfolio can only last 28 years despite larger 1.5M Portfolio size. The danger of Lean Fire is obvious.

Cory Diary

2024-0805

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Disclaimer: The articles presented in this blog reflect personal opinions and are intended for informational and sharing purposes only. Not responsible of errors. Readers are advised to seek professional guidance when making financial decisions and should take full responsibility for their choices.