Worry about running out of money
Many people worry about running out of money regard how much they actually have. But how much money is enough? Will you really run out of money? Human tends to overthink a lot, buffer too much, worry too much, think too much…If we look deeper, likely you will need lesser than what you think you need.
Recently I came by this post by the famous Mr Money Mustache – Why You’ll Probably Never Run Out Of Money, which has given me inspiration to write this post.
20 Times your annual salary
You’ve heard the rule of thumb: You’ll need about 20 times your annual salary to retire comfortably. But that number is just a rule, not a magic number. In fact, you might be surprised to learn that most people don’t even come close to having enough money for retirement. However, if you can save $1 million by the time, you’re ready to quit your job and live off of your savings alone (or later in life), then consider yourself lucky because there are very few people who will ever run out of money entirely once they reach this milestone.
How much money is enough for you?
So now that you know how much money is enough for you, let’s talk about how much is too much.
- How much money do I need to retire?
This will depend on many factors like: the type of lifestyle you want to live, where in the world you plan on living and what your current level of income is.
If someone works at a job that pays $100,000 per year but spends all their money on luxury goods then they will not be able to retire on this amount of money because their expenses are greater than their income.
However if someone lives a very frugal lifestyle then it might be possible for them to retire early with only $1 million in savings (assuming they don’t have any debt).
Everyone has different retirement needs, but $1 million sounds right for most.
It’s a complicated question, but it depends on a few factors. How much do you want to spend each month? Do you want to travel and see the world? Are your kids going to college? Will they be at home for the next ten years or will they be on their own before then, looking for an apartment and then paying for cell phone bills, car insurance and other expenses associated with independence?
How much do we need in retirement accounts today?
We started with $1 million because that’s a nice round number—and because it made sense when we looked at our current spending habits compared to what we have saved. But as I said above, this is just a starting point; everyone has different needs and desires in retirement. You might not like living alone in an apartment after being married for thirty years; maybe you have expensive hobbies that cost thousands per year (like scuba diving or rowing). If so, maybe $1 million isn’t enough after all!
Withdraw 4% or less each year from your retirement account so it lasts through your golden years.
Once you’re able to set aside the amount you need for retirement, withdrawing from your retirement account should be simple. You should aim to withdraw 4% or less each year from your retirement account so it lasts through your golden years. This is a safe withdrawal rate that most experts agree on.
Let’s see real example
Enough of ratting, let’s look at different scenarios.
First assuming a family or someone spend 5k per month but have 1 million dollars at 40 years old. This number should be quite realistic for many families in Singapore.
Many people are dividend investors, given that high interest rate environment, it is not tough to get 5% dividend, even 6% and above is manageable. Let’s use this as example.
Scenario 1 (realistic 5% yield):
Let’s assume a family or someone spend 5k per month but have 1 million dollars invested at 5% dividend returns, retire at 40 years old. In this case dividend cash flow is lesser than expenses. Will he run out of money?
| Dividend rate | 5.00% | ||||
| Spending per mth | $5,000.00 | ||||
| Age | Year | Principal | Dividend | Spending | Remaining Principal |
| 40 | 2023 | $1,000,000.00 | $50,000.00 | $60,000.00 | $990,000.00 |
| 41 | 2024 | $990,000.00 | $49,500.00 | $60,000.00 | $979,500.00 |
| 42 | 2025 | $979,500.00 | $48,975.00 | $60,000.00 | $968,475.00 |
| 43 | 2026 | $968,475.00 | $48,423.75 | $60,000.00 | $956,898.75 |
| 44 | 2027 | $956,898.75 | $47,844.94 | $60,000.00 | $944,743.69 |
| 45 | 2028 | $944,743.69 | $47,237.18 | $60,000.00 | $931,980.87 |
| 46 | 2029 | $931,980.87 | $46,599.04 | $60,000.00 | $918,579.92 |
| 47 | 2030 | $918,579.92 | $45,929.00 | $60,000.00 | $904,508.91 |
| 48 | 2031 | $904,508.91 | $45,225.45 | $60,000.00 | $889,734.36 |
| 49 | 2032 | $889,734.36 | $44,486.72 | $60,000.00 | $874,221.07 |
| 50 | 2033 | $874,221.07 | $43,711.05 | $60,000.00 | $857,932.13 |
| 51 | 2034 | $857,932.13 | $42,896.61 | $60,000.00 | $840,828.73 |
| 52 | 2035 | $840,828.73 | $42,041.44 | $60,000.00 | $822,870.17 |
| 53 | 2036 | $822,870.17 | $41,143.51 | $60,000.00 | $804,013.68 |
| 54 | 2037 | $804,013.68 | $40,200.68 | $60,000.00 | $784,214.36 |
| 55 | 2038 | $784,214.36 | $39,210.72 | $60,000.00 | $763,425.08 |
| 56 | 2039 | $763,425.08 | $38,171.25 | $60,000.00 | $741,596.34 |
| 57 | 2040 | $741,596.34 | $37,079.82 | $60,000.00 | $718,676.15 |
| 58 | 2041 | $718,676.15 | $35,933.81 | $60,000.00 | $694,609.96 |
| 59 | 2042 | $694,609.96 | $34,730.50 | $60,000.00 | $669,340.46 |
| 60 | 2043 | $669,340.46 | $33,467.02 | $60,000.00 | $642,807.48 |
| 61 | 2044 | $642,807.48 | $32,140.37 | $60,000.00 | $614,947.86 |
| 62 | 2045 | $614,947.86 | $30,747.39 | $60,000.00 | $585,695.25 |
| 63 | 2046 | $585,695.25 | $29,284.76 | $60,000.00 | $554,980.01 |
| 64 | 2047 | $554,980.01 | $27,749.00 | $60,000.00 | $522,729.01 |
| 65 | 2048 | $522,729.01 | $26,136.45 | $60,000.00 | $488,865.46 |
Conclusion: This person/family still has half a million left at 65 years old even if he has cashflow less than expenses. At 65 years old, CPF life will kick in which should give additional cashflow.
Scenario 2 (possible 6% yield):
Let’s assume a family or someone spend 5k per month but have 1 million dollars invested at 6% dividend returns, retire at 40 years old. In this case dividend cash flow is equal to expenses. Will he run out of money?
| Dividend rate | 6.00% | ||||
| Spending per mth | $5,000.00 | ||||
| Age | Year | Principal | Dividend | Spending | Remaining Principal |
| 40 | 2023 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 41 | 2024 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 42 | 2025 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 43 | 2026 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 44 | 2027 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 45 | 2028 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 46 | 2029 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 47 | 2030 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 48 | 2031 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 49 | 2032 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 50 | 2033 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 51 | 2034 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 52 | 2035 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 53 | 2036 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 54 | 2037 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 55 | 2038 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 56 | 2039 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 57 | 2040 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 58 | 2041 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 59 | 2042 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 60 | 2043 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 61 | 2044 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 62 | 2045 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 63 | 2046 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 64 | 2047 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
| 65 | 2048 | $1,000,000.00 | $60,000.00 | $60,000.00 | $1,000,000.00 |
Conclusion: This person/family still has a million left at 65 years old even if he has cashflow equal to expenses. At 65 years old, CPF life will kick in which should give additional cashflow.
Scenario 3 (optimistic 7% yield):
Let’s assume a family or someone spend 5k per month but have 1 million dollars invested at 7% dividend returns, retire at 40 years old. In this case dividend cash flow is more than expenses. Will he run out of money?
| Dividend rate | 7.00% | ||||
| Spending per mth | $5,000.00 | ||||
| Age | Year | Principal | Dividend | Spending | Remaining Principal |
| 40 | 2023 | $1,000,000.00 | $70,000.00 | $60,000.00 | $1,010,000.00 |
| 41 | 2024 | $1,010,000.00 | $70,700.00 | $60,000.00 | $1,020,700.00 |
| 42 | 2025 | $1,020,700.00 | $71,449.00 | $60,000.00 | $1,032,149.00 |
| 43 | 2026 | $1,032,149.00 | $72,250.43 | $60,000.00 | $1,044,399.43 |
| 44 | 2027 | $1,044,399.43 | $73,107.96 | $60,000.00 | $1,057,507.39 |
| 45 | 2028 | $1,057,507.39 | $74,025.52 | $60,000.00 | $1,071,532.91 |
| 46 | 2029 | $1,071,532.91 | $75,007.30 | $60,000.00 | $1,086,540.21 |
| 47 | 2030 | $1,086,540.21 | $76,057.81 | $60,000.00 | $1,102,598.03 |
| 48 | 2031 | $1,102,598.03 | $77,181.86 | $60,000.00 | $1,119,779.89 |
| 49 | 2032 | $1,119,779.89 | $78,384.59 | $60,000.00 | $1,138,164.48 |
| 50 | 2033 | $1,138,164.48 | $79,671.51 | $60,000.00 | $1,157,835.99 |
| 51 | 2034 | $1,157,835.99 | $81,048.52 | $60,000.00 | $1,178,884.51 |
| 52 | 2035 | $1,178,884.51 | $82,521.92 | $60,000.00 | $1,201,406.43 |
| 53 | 2036 | $1,201,406.43 | $84,098.45 | $60,000.00 | $1,225,504.88 |
| 54 | 2037 | $1,225,504.88 | $85,785.34 | $60,000.00 | $1,251,290.22 |
| 55 | 2038 | $1,251,290.22 | $87,590.32 | $60,000.00 | $1,278,880.54 |
| 56 | 2039 | $1,278,880.54 | $89,521.64 | $60,000.00 | $1,308,402.17 |
| 57 | 2040 | $1,308,402.17 | $91,588.15 | $60,000.00 | $1,339,990.33 |
| 58 | 2041 | $1,339,990.33 | $93,799.32 | $60,000.00 | $1,373,789.65 |
| 59 | 2042 | $1,373,789.65 | $96,165.28 | $60,000.00 | $1,409,954.92 |
| 60 | 2043 | $1,409,954.92 | $98,696.84 | $60,000.00 | $1,448,651.77 |
| 61 | 2044 | $1,448,651.77 | $101,405.62 | $60,000.00 | $1,490,057.39 |
| 62 | 2045 | $1,490,057.39 | $104,304.02 | $60,000.00 | $1,534,361.41 |
| 63 | 2046 | $1,534,361.41 | $107,405.30 | $60,000.00 | $1,581,766.71 |
| 64 | 2047 | $1,581,766.71 | $110,723.67 | $60,000.00 | $1,632,490.38 |
| 65 | 2048 | $1,632,490.38 | $114,274.33 | $60,000.00 | $1,686,764.70 |
Conclusion: This person/family has 1.7 million left at 65 years old even if he has cashflow more than expenses. At 65 years old, CPF life will kick in which should give additional cashflow.
Scenario 3 (worst case 4% yield):
Let’s assume a family or someone spend 5k per month but have 1 million dollars invested at 4% dividend returns, retire at 40 years old. In this case dividend cash flow is much lesser than expenses. Will he run out of money?
| Dividend rate | 4.00% | ||||
| Spending per mth | $5,000.00 | ||||
| Age | Year | Principal | Dividend | Spending | Remaining Principal |
| 40 | 2023 | $1,000,000.00 | $40,000.00 | $60,000.00 | $980,000.00 |
| 41 | 2024 | $980,000.00 | $39,200.00 | $60,000.00 | $959,200.00 |
| 42 | 2025 | $959,200.00 | $38,368.00 | $60,000.00 | $937,568.00 |
| 43 | 2026 | $937,568.00 | $37,502.72 | $60,000.00 | $915,070.72 |
| 44 | 2027 | $915,070.72 | $36,602.83 | $60,000.00 | $891,673.55 |
| 45 | 2028 | $891,673.55 | $35,666.94 | $60,000.00 | $867,340.49 |
| 46 | 2029 | $867,340.49 | $34,693.62 | $60,000.00 | $842,034.11 |
| 47 | 2030 | $842,034.11 | $33,681.36 | $60,000.00 | $815,715.47 |
| 48 | 2031 | $815,715.47 | $32,628.62 | $60,000.00 | $788,344.09 |
| 49 | 2032 | $788,344.09 | $31,533.76 | $60,000.00 | $759,877.86 |
| 50 | 2033 | $759,877.86 | $30,395.11 | $60,000.00 | $730,272.97 |
| 51 | 2034 | $730,272.97 | $29,210.92 | $60,000.00 | $699,483.89 |
| 52 | 2035 | $699,483.89 | $27,979.36 | $60,000.00 | $667,463.25 |
| 53 | 2036 | $667,463.25 | $26,698.53 | $60,000.00 | $634,161.78 |
| 54 | 2037 | $634,161.78 | $25,366.47 | $60,000.00 | $599,528.25 |
| 55 | 2038 | $599,528.25 | $23,981.13 | $60,000.00 | $563,509.38 |
| 56 | 2039 | $563,509.38 | $22,540.38 | $60,000.00 | $526,049.75 |
| 57 | 2040 | $526,049.75 | $21,041.99 | $60,000.00 | $487,091.74 |
| 58 | 2041 | $487,091.74 | $19,483.67 | $60,000.00 | $446,575.41 |
| 59 | 2042 | $446,575.41 | $17,863.02 | $60,000.00 | $404,438.43 |
| 60 | 2043 | $404,438.43 | $16,177.54 | $60,000.00 | $360,615.97 |
| 61 | 2044 | $360,615.97 | $14,424.64 | $60,000.00 | $315,040.60 |
| 62 | 2045 | $315,040.60 | $12,601.62 | $60,000.00 | $267,642.23 |
| 63 | 2046 | $267,642.23 | $10,705.69 | $60,000.00 | $218,347.92 |
| 64 | 2047 | $218,347.92 | $8,733.92 | $60,000.00 | $167,081.83 |
| 65 | 2048 | $167,081.83 | $6,683.27 | $60,000.00 | $113,765.11 |
Conclusion: This person/family only has 160k left at 65 years old if he has cashflow less than expenses. At 65 years old, CPF life will kick in which should give additional cashflow. He should still survive until last day on earth with CPF life kicking in at 65. In the very worst case, he can sell off his flat or rent out his flat.
Let’s summaries the outcomes
Everyone will likely survive with 1 million even in the worst-case scenario of 4% in dividend income (This is not difficult to achieve, especially in such high interest rate environment – your FD, saving accounts, MMF, SSB etc or very low risk stock can get 4% easily).
Do you think everyone really think too much and forgot to live life to optimal? Remember the book that i have shared earlier – Die with Zero. See this link again and below.
Love your life with your heart
Here’s the thing: You only live once. And by “once” I mean one time, because we all die at some point. But that doesn’t mean that your life is over when you die—it means that it ends. And then what?
Where does your soul go when your body dies? Did you spend your entire existence worrying about what other people thought of you? Did you waste time on things that ultimately didn’t matter in the grand scheme of things? Did fear keep you from doing anything because there might be consequences, but then again maybe not?
If this sounds familiar to you, let me tell you something: It’s okay. We all make mistakes; we all have regrets and look back on our lives wondering what could’ve been if only we had done X differently. But it’s never too late to change course and start living a better life today—and tomorrow!
Stop overthinking everything. Life is too short to be stressed about every little thing.
- Stop worrying about the things you can’t control. Worrying doesn’t help anything, so don’t waste your time on it.
- Stop stressing about things you can’t change. Again, this is a waste of energy and time; focus on the present moment instead of what happened in the past or might happen in the future.
- Don’t worry about what other people think of you—they’re often wrong anyway!
- Don’t worry about the past—you can’t change it! Instead focus on making today as good as possible by doing something positive.
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