My 10–30 Years Retirement Plan (Example of How You Can Create a Realistic Investment Plan)
All the currencies mentioned here are in HKD.
The goal?
$12 million
(Assuming a 3% return, I can withdraw $30,000 per month which I can comfortably retire with)
Criteria of the plan
Execution
I am lazy — I don’t have time and don’t want to track the stock market day by day because it makes my heart pumps faster.
I need a simple plan that I am confident to execute — month after month, year after year. I’ve set a 10 year timeline for myself to achieve the goal.
2. All Weather
I want peaceful, stable investment plan that ensures my pot of money grows sustainably through the good times and bad times.
3. Diversification
I had made investment mistake in the past (putting all my savings into a high yield 12% corporate bond which the company ended up in liquidation and I lost all of my money). So I have learnt about risk management the hard way.
Financial Tools
- Cash / cash equivalent
- Rental property
- ETFs
Income allocation
Every month, when my salary comes in, the money will go to three places:
- 1/3 mortgages and household expenses
- 1/3 investment in ETF portfolio
- 1/3 cash / cash equivalent (savings)
My current annual income is $80,000.
After-tax and mandatory pension, annual income is around $60,000.
So every month,
$18,000 on spending and household
$18,000 investment in ETF portfolio
$18,000 cash / cash equivalent (savings)
Based on my career track record, my income will go up around 15–20% every 2–3 years.
Asset allocation (the Billionaire Ray Dalio way)
30% stocks
15% mid-term bonds
40% long-term bonds
7.5% gold
7.5% other commodities
30 years plan
$18,000 investment in ETF portfolio per month
= $2,160,000 for 10 years
Assuming a 30% growth every 10 years (i.e. 3% each year — which is very achievable given that S&P historically grows 8–10% per year):
After 10 years the portfolio will be worth $2,808,000.
After 20 years, the portfolio will be worth 6,458,400.
After 30 years, the portfolio will be worth 11,203,920.
Plus the full-paid rental property (which is bought 3m in 2016 and assume it will be double in price in 30 years — which is very achievable given that property historically double every 10–15 years), total asset would be over 12m (around 17m).
Rental property
Goal: full pay property
Bought in 2016 for 3m
30 years mortgage
Explore early repayment option with bank (for 10 to 20 years)
20 years plan
$18,000 investment in ETF portfolio per month
= $2,160,000 for 10 years
Assuming a 60% growth every 10 years (i.e. 6% each year — which is still quite achievable given that S&P historically grows 8–10% per year):
After 10 years the portfolio will be worth $3,456,000
After 20 years, the portfolio will be worth 7,300,800
Plus the full-paid rental property (which is bought 3m in 2016 and assume it will be double in price in 30 years — which is very achievable given that property historically double every 10–15 years), total asset would be around 13m.
10 years plan
$18,000 investment in ETF portfolio per month
= $2,160,000 for 10 years
Assuming a 80% growth every 10 years (i.e. 8% each year — which is still quite achievable given that S&P historically grows 8–10% per year):
After 10 years the portfolio will be worth $3,888,000
Plus the full-paid rental property (which is bought 3m in 2016 and assume it will be worth around 4m after 10 years), total asset would be around 7.8m. Still 4.2m short.
Therefore, if I want to retire in 10 years, I need to reinvest 1/2 or 1/3 of the income generated from my asset.
Assume the 7.8m asset generates 3% each year after I retire, I can only retire with $15,000 or 20,000 each month and have to reinvest $15,000–20,000 per month for the next 8–10 years.
Although it may mean that I would have to watch my spending for some years, it is still a do-able and achievable retirement plan.
Creating your own retirement plan
Investment is a plan. It is not an ad hoc gambling based on tips you heard in the supermarket or ‘hot stocks’ recommended in financial magazine or newspaper.
With a plan, you have some figures as goal and that creates a vision that you can work towards and compare progress with. That vision pulls you to the goal. Therefore, I strongly suggest that you follow the steps in this article (with your own choice of investment tools and your desirable and achievable figures that are meaningful and applicable to your lifestyle and your personality).
This is the first step towards financial freedom or retire early.
Note: this is not investment advice. I’m not financial planning professional. Just sharing what is working for me as part of my investing strategy or what I have learned on my investment journey. Please be reminded to do your own research and consider your own circumstances before making any financial decisions. You could also check with your financial professional to understand what would be best for your situation.
