Our hot take on retiring early in Singapore

Editor’s note: The TWS way of building a retirement fund is to build a diversified portfolio consisting of various asset classes of varying risk – stocks, bonds, property, REITs, etc.

WARNING: Sponsored by Income for Gro Retire Flex.

If you’ve been reading our blog since the beginning, you might guess that I (Ruiming) started off as a F.I.R.E enthusiast in my early 20s, but Wei Choon isn’t one. You can check out his thoughts here.

For the uninitiated, F.I.R.E stands for Financially Independent, Retire Early, a lifestyle which usually involves:

• Saving aggressively (more than 70%)
• Living extremely frugally
• Earning wealth quickly
• Invest this money to generate ~4% returns a year for you (If you have $1,000,000, you’ll aim to get $40,000 a year).

My journey with F.I.R.E

Looking back, I understand why I embraced F.I.R.E.

I was 25, working long hours in advertising, not always finding the work I did meaningful. There were unpleasant clients, and my mindset was that I wanted to get this whole ‘work’ thing over and done asap.

It was the magic bullet that would solve all my problems, and I often advocated this to many of my friends (they were less enthusiastic).

Seven years on, I’ve reached the point of Regular F.I.R.E. However, along the way, I think I’ve developed a more nuanced view about FIRE.

Here are my candid reflections about my journey.

F.I.R.E was never meant to be mainstream

Many people have texted us to say that they feel ‘lousy’ because they feel that retiring at 35, or 40 is an unattainable goal.

The truth?

No one should feel bad about that.

Here’s some context: The F.I.R.E movement’s most (sparked by this book) vocal advocates are people who are high-income earners, working in fields such as tech law, finance, or entrepreneurs who sell their start-ups for millions of dollars.

So here’s the thing. Since income is relative, being a high-income earner is never, and will never be mainstream.

Example: Saving 70% of your income is easy when you earn $20,000, but less so when you earn $2,000.

Your salary	How much you need to spend to save 70% (after CPF¹)
$2,000	$480
$3,000	$720
$4,500	$1,080
$5,000	$1,200
$8,000	$2,040
$20,000	$5,640

¹The current CPF contribution rate is 20% for employees aged 55 and below.

Here’s a reality check: assuming the median income of $4,534² in 2020 (according to MOM’s survey ), someone following conventional savings advice (saving 30% of their income over 20 years) would only have $326,448 come 2040. That’s hardly enough to retire early in Singapore.

²The median gross monthly income from work (including employer CPF) of full time employed residents in 2020

Earning big money in your twenties usually involves a lot of personal sacrifices and/or taking on risks. Top performing employees often spend ridiculous hours at work for the hopes of a promotion. Entrepreneurs can go for months without income for the promise of future success.

These are unconventional paths many people (Singaporeans or not) don’t take.

So, let’s not put that unhealthy expectation for everyone to retire before 40.

It’s objectively difficult to live cheaply in Singapore

F.I.R.E is possible in many countries (such as the U.S.) because there are places where people can survive on relatively little money.

For example, a New Yorker can move to Kansas City to heavily reduce their expenses. Someone working in Tokyo can move to Sapporo, etc etc.

In contrast, the difference in cost of living between Sembawang and Bishan isn’t as much.

Another thing to consider is that large countries have large swathes of land that people can live off the grid. They can grow crops, raise livestock and build self-sustainable homes for relatively little money.

Because Singapore is a tiny city-state lacking land and natural resources, this option simply isn’t viable for Singaporeans.

If you want to retire early as a Singaporean, be prepared to leave Singapore to move to a less developed country with lower costs of living – obviously easier said than done.

We start off at different places

A large part of why I can pursue F.I.R.E is because I have the privilege of having parents that have planned for their own retirement.

This is quite significant.

If you have dependents such as children, siblings or elderly parents, achieving F.I.R.E will be extremely tough. Think about it: Achieving financial independence is tough enough. Doing it for multiple people is an uphill battle.

That means the pursuit of F.I.R.E is also dependent on your starting point in life.

Difficult family situations might force you to pursue stability, or dissuade you from taking the risks needed to grow your wealth.

For example, you might be forced to sit on a huge sum of emergency funds instead of investing it as you might need the money to send your younger siblings to school.

Some start their journeys behind the starting line, so far back that living the frugal F.I.R.E lifestyle will only allow you to lead a relatively ‘normal’ life.

For context: I grew up in a 5-room flat in a Jurong East HDB, so we were comfortable, but definitely not the live-in-private-property sort of people.

If Not F.I.R.E, then what?

Here’s our take.

If you can’t retire at 40, it’s not a big deal. The more important part of F.I.R.E is F.I (financial independence), not R.E (retire early).

You reach for F.I. so you have the OPTION of R.E.

Our belief is that humans need purpose to survive, and often, this purpose is found through work – whether paid or not.

But here’s the problem with purposeful (or enjoyable) work. It often doesn’t pay as well; we all like a little meaning in our lives, but we don’t want it to come at the expense of our long-term financial health.

For that reason, our aim is to be financially independent first, before focusing on work that is more meaningful, albeit lower paid.

Look, in a perfect world, we can all be paid highly for work that we enjoy and find meaningful.

Unfortunately, we don’t live in a perfect world. Not all jobs have rewarding pay. While some of us might have the privilege of landing our dream jobs early, others might need to put their financial needs as a priority instead.  By securing your financial independence first, you buy yourself the luxury for that search for purpose.

Remember, F.I.R.E is ‘a goal’, it is not ‘the goal’

Even if you have the means to F.I.R.E, it doesn’t mean you need to.

I sacrificed my time, relationships and enjoyment to achieve F.I.R.E. Much of my weeknights in my twenties were spent ghostwriting white papers and other side hustles.

This is the time I’m never getting back, no matter how much money I have (because money can’t buy everything).

The important thing here, is that like me, you know the risks of your decisions.

I started F.I.R.E with complete knowledge that there was the risk I would burn out or suffer a mental breakdown and forgo many creature comforts. At the same time, I actively managed those risks and kept myself very self-aware.

Likewise, if you want to travel the world in your 20s and 30s or raise a family, you must also know the risks involved.

For example, in both scenarios above where early retirement is not an option, then you will need to put in special effort to continuously upgrade your skills and keep up with tech.

At the end of the day, you don’t need to feel bad if your life goals don’t align with ours. What you need to do is to make the best long-term decisions for yourself so you can attain your life goals.

More often than not, we will push for early financial planning and discipline because the default for most people is to not care. But our advice, like all advice, should be taken with your own personality, tendencies, preferences and life goals in mind.

Because in the long term, you are the one living with your decisions.

Stay Woke, Salaryman

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All information and opinion in this article are solely those of the author He Ruiming (“The Woke Salaryman”) unless it is specifically indicated otherwise in this article. The Woke Salaryman is solely responsible for all opinion and the accuracy and completeness of information, including the intellectual property used in this article. NTUC Income Insurance Co-operative Limited (“Income”) is not responsible nor liable to any party in any manner whatsoever for this article.  This article is for general information only and is not and shall not be deemed as an offer, recommendation, solicitation or advice by The Woke Salaryman or Income to buy or sell any product(s) or investment product(s). It is not and should not be deemed as any form of financial advice and has no regards for any person’s investment and financial needs. If you are unsure whether this plan is suitable for you, you should seek personalised financial advice from a qualified insurance advisor. Otherwise, you may end up buying a plan that does not meet your expectations or needs. As a result, you may not be able to afford the premiums or get the insurance protection you want. Precise terms, conditions and exclusions of the product are found in the policy contract.

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Information is correct as at 3 September 2021.