I'm by no means a certified financial planner, nor had I acquired any form of paper qualification in this field. Something just came pop up in my mind, and we just had this discussion on this topic, and I though it might do some good to those that are interested. This is just the tip of the ice berg on the topic, but that's what I know, and would just like to share with the rest.

So here it is. Enjoy ^_^



Everyone should have a retirement financial plan. For those that haven't in their wildest dream ever though of it, it's still not to late to start now.

A retirement plan is a plan that plans for when the time comes, and when you are no longer working, how much is the amount that you need to survive. Some named it differently -achieving financial freedom- which actually means the same thing as, maintaining the current lifestyle without having to worry about work.

Everyone wants to get rich, and when you ask someone how much money they consider rich enough, most of the time, they give you a blank look.

So, here, I would like to help you determine the rough estimate amount that you need to achieve your own retirement plan.


1. Decide your current monthly retirement income.
Assuming, that I've decided that I would need a monthly income of $1000 right now, at time moment, to retire comfortably. This $1000 is excluding the current car installment, housing loan payment, etc. It's just the amount that you actually need to pay off your food, electricity, and other expenses.

2. Calculate the amount u need right now to retire.
If u need $1000 a month right now, and the bank is paying an interest rate of around 4%, then you would need $300,000/= to achieve that. With $300,000 sitting in a 4% FD, that would generate u $1000 every month. This will be the amount that you can retire, ONLY IF u have that money right now.

3. Decide when you wanna retire.
If you are currently 30 years old, and would like to retire comfortably at the age of 50, then you have 20 years till retirement.

4. Calculate the amount u need to retire in the future.
Alright, $300,000 is the amount that u can retire RIGHT NOW, at this instance, if only u have that money. Let's say you don't have, and you plan to retire in 20 years time, then the amount u need by then would no longer be $300,000, but something extra (due to the fact that u need to factor in the inflation rate).

15 years ago, i had my char koay teow at $2/-, right now, they are charging around $4/-. With that in mind, i can say that the inflation compounding rate has doubled in 15 years. By using the magic 'rule of 72', we devide 72 by 15, and we have 3.6% compounding rate of inflation for the past 15 years.


Now, I'll teach you how to calculate the amount that u need right now ($300,000), by factoring in the inflation rate (3.6%), and find the actual amount that you need in the future (20 years from now).

a) click 1.036 in your calculator (this is actually the incremented 3.6%)
b) click x, then 300000. ($300000 inflated by 3.6% for 1 year)
c) click the equal sign 20 times (compounding it for 20 years)
...... and you get $608,578/=.

This will be the amount that u need to amass in order for you to retire comfortably based on the currently lifestyle of a passive income on $1000 per month.

So ..... that's it. 4 simple steps.
And if everything still seems pretty daunting and complicated to you, fear not.
Here's the excel file that will do all the calculation for you. All you need to do is fill the the numbers on the green boxes, and the calculation will be made for you (on the yellow boxes).





So now, you can be your own financial planner, in a way ^_^
Enjoy :)

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