# You can retire when you have a fully-paid house and 25x your annual spend in savings

He said that he and his wife retired when they had a fully-paid house and saved US$600,000 (to be invested to get 4% returns per year = US$25,000). This means that you need to have about 25 times your annual spending + a house to retire. The annual returns on their investment would be able to fund their US$25,000 yearly expenses. They said that this rate of return, there is a good chance that their money would never run out even if they had some medical expenses to pay.

Lucky them!

Let's do the math in Singapore terms. We shall assume that the couple are graduates and Singaporean. The amount of savings per person can be cash+cpf savings.

**Scenario 1:**

Assuming cost of living is

**SG$24,000**per year.

Cash required: SG$24,000 x 25 = SG$600,000.

Cost of cheapest 3-room in non-mature estate BTO HDB after deducting grants: SG$120,000

Total: SG$720,000

Assuming both contribute equal share, the amount per person is: SG$360,000.

Assuming the age the woman starts working is 21. She has 9 years to earn and save SG$360,000. Amount to save per year: 360,000/9 = SG$40k

Assuming the age the man starts working is 23 (after completing National service). He 7 years to earn and save SG$360,000. Amount to save per year: 360,000/7 = SG$51k

Clearly, this is impossible! Because if they earned a combined income of over 60K per year, they would not even qualify for BTO in a non-mature estate.

**Scenario 2:**

Assuming cost of living is

**SG$12,000**per year.

Cash required: SG$12,000 x 25 = SG$300,000.

Cost of cheapest 3-room in non-mature estate BTO HDB after deducting grants: SG$120,000

Total: SG$420,000

Assuming both contribute equal share, the amount per person is: SG$210,000.

Assuming the age the woman starts working is 21. She has 9 years to earn and save SG$210,000. Amount to save per year: 210,000/9 = SG$23k

Assuming the age the man starts working is 23 (after completing National service). He 7 years to earn and save SG$210,000. Amount to save per year: 210,000/7 = SG$30k

I think this is achievable. The starting pay of graduates is above SG$36k per annum. And there's still the extra 16% CPF contribution paid by the employer. If the couple starts saving as soon as they start working, it is

*possible*to save that amount of money.

So the guy was right. The secret really is in keeping expenses low.

But it is possible for a family of 3 in Singapore to spend only SG$12,000 per year? I think it is possible if they cook their own food, do not take vacations, do not buy a car, do not buy expensive electronic gadgets, do not pay for child care or enrichment lessons for their child, and only buys cheap clothes once a year. Sounds terrible? In today's terms, perhaps. But when I was a child, this lifestyle was common in most families. If you don't mind living this way, there is no need to ever go to work again!