Investors who have more than enough assets for their lifetime may consider the most conservative strategy to build a multi-generation nest egg
I VIVIDLY remember my professor describing a simple formula for calculating the amount of money I would need to retire on: just multiply your annual expenses by 25. I thought I had this whole retirement planning thing figured out. How tough could it be?
The guideline described was the “4 per cent rule”. You multiply the annual cash required by 25, which would let you “safely” withdraw 4 per cent every year and have it last approximately 30 years before you run out of money. So, if you calculated that you would spend S$8,000 a month, you would need S$2.4 million in retirement savings.
It didn’t take long for the harsh reality to set in: That simple multiplication wasn’t going to cut it. Will you end up living until 102 like your great-aunt? Will your investment returns over 30 years of retirement resemble a terrifying roller coaster or be relatively smooth sailing? What about healthcare cost projections in the later decades of your life?
