Financial Freedom

Saving for Retirement at 30

It’s starting to become the dream of more and more people, to be able to retire just after you leave your 20’s. So saving for retirement at 30 is sort of the new thing, the thing that many young professionals strive for and something that can be in the back of people’s mind when they choose their occupation. The better job, the more money, and the earlier they can retire.

In a fluctuating world economy you have to take several things in to consideration if you’re seriously thinking about going in to retirement when you’re in your early 30’s. First of all, you need to look at how much money you can make in a month and in a year from your occupation. After that, the amount you can spare for an investment portfolio.

Let’s face it, unless you get a job that pays 8-10 thousand US Dollars every month you won’t have enough to get by for the next 50 years when you turn 30. So the best way of increasing your money if you have a steady job is by getting an investment portfolio. Invest your money in stocks, bare bonds, commodities, oil, gold and silver, and currency to get the best rate of return on your money.

Saving up for retirement at 30 with the help of an investment portfolio isn’t the easiest thing if you haven’t got
an idea how these things work. Then what you can do is get an investment adviser that can give you the best advice on where to invest your money for the best return.

We said previously that the money has to last for 50 years, and that’s true. The average life of a human is around 80 years, so if you’re looking at retiring at 30 you have to save up enough money for the coming 50 years. Now during your 20’s it is all about building your capital, that means a higher risk on your investments and putting more money in to markets that can have a large pay off.

When you decide to retire you will be thinking about keeping your capital, so making safe investments where you will have a much lower pay off rate but much more stability.

The next thing to do is to choose where you’d like to retire to. The most common and cheapest places would be the Philippines, Thailand and even Singapore. South East Asia is becoming a more and more popular destination for Asians looking to retire early. Find out basic costs such as, average rent per month, health care, food, transportation and all the other things that you will spend money on in a month. When you find a reasonable estimate of what you need to get on well every month it’s time to start doing a bit of math.

Take your average monthly spending and multiply by 12. That’ll give you your annual spending. Take your annual spending and multiply with 50 and you get an estimate of what you’ll need to get by for the next 50 years. So for example in Thailand you might need 50 000 Baths per month, 600 000 Bath in one year and 30 000 000 Bath for the next 50 years. A way to save on your monthly cost is to purchase a house or apartment when you move over but that would mean you’d have to increase what you need before you actually move.

[This article is a guest post by a writer in Philippines. Read more about retirement planning]

First REIT and Ascott REIT Declare Dividends

First REIT just declared distribution/dividends of 1.93 cents per share. A quick look at First REIT's dividend history gives me some sort of confidence to enter this REIT again. I had previously sold off my entire shareholdings in it but have recently entered into it again buying 10 lots of it recently. Since the distribution is paid quarterly, it looks like I will be receiving a small bonus every 3 months. Not too bad for some passive income. Based on my 10,000 shares, I figure that I will be receiving around $193 for Feb 2012.

Ascott REIT had also declared their semi annual dividends of slightly over 4 cents per share. I currently hold 15 lots in Ascott REIT so that should also provide me with a neat sum of around $600 for Feb 2012.

I am also still waiting for my dividends from Gamco Global Gold Trust (GGN). This is a monthly dividend stock and though the dividend is paid on 24 Jan, I figure that I will only receive the cheque in late Jan or early Feb.

Investing in Real Estate

Real estate is usually one of the most expensive purchases that a person ever makes. The cost of real estate has risen significantly worldwide over the last decade until the economic problems came to life. Even now that housing prices have stabilized, they are still much higher than at the start of the last decade.

This can make it difficult for people to buy or invest in real estate, but it is great for anyone who bought before the prices started to rise. As any loans on the property are paid off over time, the cost of living there will be limited to any taxes and repair bills.

Advantages of Real Estate

As well as providing you with somewhere to live, or work, real estate can really work as an investment. If you own housing, you can rent it out to bring in a nice amount of money every month to supplement your salary. You will have to pay out for any repairs, and bad tenants can do a lot of damage, but many landlords have an agency that takes care of all that for you. Another advantage of property is the high cost of it. It might cost you a lot of money to buy, but you can usually sell it for a profit. Many landlords accumulate a portfolio of property that they use as a retirement fund, and sell it off when it is time to retire.

Disadvantages

Real estate is really expensive, and it can be difficult to borrow the money you need to buy a property. This can make it very difficult to start investing in real estate, although treating it like a business and presenting a solid plan to your bank may help if you want an investment property. A lot of people also end up asset rich and cash poor.

Choosing Real Estate

The hard part is choosing which real estate to invest in. Your intended use of the property will determine which is suitable. A house for your family might be a completely different choice to a property intended for rental to the holiday market in a resort area for example.

If you have the necessary skills, then you can make a lot of money by buying properties that need renovating and performing the necessary repairs. Your skills will enable you to perform the repairs quickly and cheaply and you can turn around real estate like this for a profit within a short space of time.

Building and maintenance skills are also useful if you want to be a landlord. By doing the repairs yourself it will save on the costs of paying for skilled craftsmen. It will also save money if you can manage the real estate yourself and deal with the tenants, but many people prefer to use an agency to do that.

Real estate can be a great property investment that can make a great profit, but can lead to large losses. Anyone considering property as an investment needs to research the market properly and invest in the right property in the best location they can afford.

[This is a guest post]

How Much of Salary to Save

Based on a recent online survey, it was found that 2 out of 3 Singapore workers were saving no more than 20 per cent of their monthly salary. How much salary do I save?

I figured that I am currently saving about 30% of my monthly salary. This goes into savings plans, bank deposits or stock investments. This is probably possible for me because I have kept my "wants" to the bare minimal. Apart from the occasional dining at restaurants, I probably do not spend much on anything else. No gadgets, clothes or whatever. So most of my expenditure is really going into my needs and paying for the bare essentials.

Based on my rough calculations, I also figure that I am possibly able to save as much as 50% of my salary if I really want to. But that will really mean cutting back on many of the "luxury" items that I can afford. Saving comes really easy to me as I am pretty much of a saver rather than a spender. I do not see the need to have or own the latest toys and gizmos. Being frugal is perhaps part of me =) And that is perhaps why I have written posts like:

As many people have always advised, it really is not about how much you save. The most important thing is to get into the habit of saving. Try to build up an emergency fund and also set up a disciplined savings plan for retirement. Thereafter, it should get quite easy as you discover more and more ways to save money. Like they say, the first step is always the hardest.

What Should I Do With My Ang Baos?

Recently, I asked readers for their views on what should I do with my annual bonus. This was really triggered by reading the newspapers and learning that most Singaporeans actually intend to spend their annual bonuses instead of saving it.

Since the Lunar New Year is upon us, I am sure many readers are still in the privileged group (i.e. unmarried) and are still entitled to collect red packets (or what we commonly call as Ang Baos in Mandarin). Again, I post the same question: What will you do with the money in your red packet?

Or for those of you who are no longer entitled to collect red packets, what do you wish that the receivers of your red packets will use the money for?

At the same time, I will like to wish all readers a Happy Lunar New Year!

Retirement Age and Retirement Planning

As soon as we settle into working life we start to look forward to retirement - that great day when we can leave work for the last time and be free to enjoy our golden years. For most people, this happens at the birthday after you reach the government retirement age. Some people are lucky enough to have the financial security they need for early retirement. In either case, some form of retirement planning will be required. Retirement planning basically involves finding out the age that you will retire at and working towards saving enough money so that you will be able to live comfortably without drawing a salary when retirement comes.

The Retirement Age Act

In Singapore, the Retirement Age Act determines the minimum age of retirement. A person can currently retire the day before their 62nd birthday. This may change in the future, and as the average population ages the retirement age is likely to increase like it has in other countries. In some parts of Europe the retirement age is as high as 67 currently.

Employment Contracts

The employer should give the employee advance notice of their retirement unless their employment contract explicitly specifies it. It is also unnecessary for the employer to give any retirement benefit unless it is in the contract.

Employers do not have to retire an employee once they reach retirement age. If both are happy, then they can continue to work for as long as the employee remains fit and able to perform their duties.

Wage Reductions

To help companies in Singapore continue to employee older people, it is legal for them to reduce the wages of employees over the age of 60. This can be a straight salary reduction, or a reduction in any other employee-related costs such as bonus, benefits and pension contributions.

This can lead to experienced people losing up to 10% of their salary as soon as they celebrate their sixtieth birthday. Luckily, employers cannot just base the reduction on age alone, but must take into account other reasonable factors. These can include the employee’s ability to perform their duties fully as they age.

It is important to remember that the 10% is a maximum reduction and can be taken off in one chunk or in several smaller deductions. This allows the employer to effect a gradual reduction to the employee’s salary over a period of time.

Working after Retirement Age of 62

The Singapore Retirement Act does not allow for compulsory retirement at the age of 62, and neither does it stop anyone continuing to work beyond that age if they want to. Anyone who wants to continue working should arrange it with their employer. Re-employment after age 62 is also probably going to be a norm in the future.

Other Exceptions

Some fixed-term employment contracts are immune from the Retirement Act. People on these contracts can continue to work as normal and then retire at the end of the contract. A notification exists to the Retirement Act that specifies which people are exempt.

Conclusion

Retirement usually marks the end of your "paid" working life, and for many people it is something to look forward to. Others love work and try to continue working for as long as they possibly can. Whatever your views, it is important to know the laws in your country concerning retirement so that you know what are the likely scenarios (e.g. pay cut) when it is your time to retire.

"How to retire in Singapore?" is perhaps a question that is often on people's minds. For some people, it might even involve drastic moves like moving to a cheaper country to retire (read: Retire in Philippines). Well, if you are interested, you can also read some of my thoughts about retirement and let me know what you think.

Land Banking Investment Risks

[Photo credits: Image by kwerfeldein]

Land banking is an investment scheme where someone buys a piece of land and sells it later for a profit. Sometimes they divide the land into a number of smaller plots and sell each one to generate a profit. The investor can hold the rights to the land for a short time and make a quick profit or hold the position for years before selling the land.

Often the plot is a piece of pristine land that is agricultural in nature, but it can also be former industrial land which might be contaminated. If the landowner is able to get building permission to develop or rezone the land, it will increase the value of the land, and they can make a profit by selling it to a building developer. Sometimes the land is completely undeveloped and it might be possible to use it for farming.

Advantages of Land Banking

One of the great advantages of land banking over other kinds of investment is this: the investor owns something that physically exists. This is different to stock and commodity traders who own a certificate, a piece of the business which is not really tangible to certain people or in other more complex finance instruments, they are just "numbers on a computer". Land banking thus often appeals to a different kind of investor who like the idea that their investment is actually a tangible asset.

Problems with Land Banking

I have written previously to beware about land banking, primarily because it is often an unregulated investment in many countries. In a previous poll that I did on this blog, respondents also felt that land banking was one of the more toxic investments around. Most people in Singapore are also probably aware of the case surrounding Profitable Plots which was involved in land banking.

Like any other form of investment, the price of land can go down as well as up. If the piece of land contains industrial contamination or can never get permission for development then it becomes effectively worthless.

Another problem with land banking is that a number of unscrupulous people have used it as a way to defraud people. They buy a plot of cheap land and then produce fake documents that make it look like it is worth more than it actually is and sell it on to unsuspecting investors. The rogue land bankers just vanish with the money leaving the investors with a worthless tract of land.

Locations of the Land

Land bankers can, in theory, invest in land anywhere in the world. However, some countries have laws that prevent non-nationals from owning land. If you are considering investing in land it is important to consult a lawyer who is an expert in the laws where you are buying the land. This will help to prevent any legal problems surprising you in the future.

Environmental Issues

In some areas of the world, virgin land is being taken and cleared to become agricultural land. This virgin land is often some way from existing agricultural land and infrastructure making it cheap to purchase. The investor can then hold the rights on the land until the infrastructure moves closer to it. At this point, they can rent it out to farmers or sell it for a profit. It might also be that the land is in an area suitable for mining and the investor buys the land in the hope to sell it to a mining company. In either case, the government could decide that the land lies within a protected area

Buyers Beware

Land banking is one way for people to invest and actually have the feeling of owning something tangible. It can be a great way to make money, but it is also a risky business. Anyone considering this should probably get legal advice first and only risk money that they can afford to lose.