So when you treat it as a bond, you take into acc SA only?
I agree with Limster on this point, and I would count Medisave to a degree. You can apply a discount rate to it -- multiply your MA by 50%, for example, and count that result as your bond-like value of MA. Also, MA funds are part of your estate to your nominated CPF heir(s), so I would count them in calculating any life insurance needs. (Again, you might discount them slightly -- deduct $10,000, for example -- with the assumption that you might use those funds for medical spending at end of life.)
The data actually says 5.25% (10th percentile) to 11.88% (90th percentile) over 30 years with 8.71% at the 50th percentile.
No, we're arguing that 8% (net of all costs) is too optimistic for a future projection. Past results are not necessarily indicative of future outcomes.
First of all, when you're making a projection like this, you don't take a median, and you don't forget to factor all costs. (Fund performance data doesn't include all costs.) You should properly take something substantially below median, because even if the future is as bright as a very bright past was (a big if), half the time you'd expect to undershoot the median.
U.S. retirement planners used 8% as a "rule of thumb" for many years, for those in their accumulation phase with "textbook" portfolio allocations. They're now typically using 7%. I use(d) 6%.
I would not even use 6% for a Singapore-heavy investment portfolio, net of costs -- I think that's too high.
Anyway, the simulation is based on US based portfolio including 30% allocated to global stock market. I am not sure how adding local allocations affect the returns.
Lower, and there's a very good, logical reason for that: the SGX simply isn't getting the future Amazons, Facebooks, and Alphabets of the world. It's not a stock market attracting IPOs. So you've effectively chopped off the innovation/disruption part of your investing that, eventually, gets picked up with simple index investing elsewhere. (It's also real estate heavy, and the government is emphatically not interested in sustained overheated real estate, which is what's required to generate long-term gains above the general rate of inflation.)
Consequently I don't give the STI as high a forecast. On a total return basis I'm kind of thinking 4.X%, but sometimes I question whether that's too optimistic.
Anyway, if you're conservative in your forecast -- and you should be -- you will be more liberal in how much you save -- and you should be.
The above figures are nominal and with anchored, current inflation figures.
I also didn't use this number to come up with 3.25%. Rather, it is based on the commonly accepted 4% safe withdrawal rate (Trinity study). It's a more conservative number that I am using to set the upper limit of my budget.
Some financial experts have questioned the 4% rule of thumb, and it's also not a rule of thumb for 30 year olds. It's a rule of thumb for 65+ year olds (or at least 60+). It assumes traditional retirement age, not "slacking off" after your 20s.
Now, if you want to stop earning an income immediately, one thing you could do is to buy an escalating immediate single premium life annuity from a reputable/high credit rating insurer. Use that as a baseline income floor, an income that would be adequate to your needs. Then use the rest of your wealth (if any) to try to improve on that baseline. That'd be quite safe.
What other benefits does VWRD has over IWDA+EIMI? I don't mind manually selling since it's easier to stay discipline in reinvesting.
VWRD is also a single trade to buy a rather well apportioned mix of IWDA and EIMI, so you save commissions.
Yes, it's probably going to be the best Singapore dollar bond fund, if that's something you want/need. There's not exactly a long list of such funds, though, so it hasn't got much competition.
