Pardon my noobnest but I still have a few burning questions.
1. Let's say if I retire at 40. How does this passive investing portfolio ensure that I will not run out of money. Assuming my drawdown rate is 4%.
2. I'm turning 24 this year and have an aim to semi retire in my late 30s. With ~15 years to run would it be achievable (current savings rate 55%)
1) It doesn't. A 4% withdrawal rate is aggressive, and 40 is extremely early to retire. If you do that, you're extremely likely to run out of money no matter what your investment strategy is.
2) "Semi retire in your late thirties"? Mate, that is not happening unless you hit the Powerball, or you don't mind living on cup noodles for fifty years.
You can expect to live for about 83 years on average; bit more if you're a woman, bit less if you're a man. And frankly, the odds are pretty good that you're going to live 'til you're ninety or a hundred, so you need to plan for that. Let's leave CPF Life aside for now, though that will certainly help.
Let's be conservative. Let's say you already own a house, so you can live on $50k a year, inflation adjusted. If your investments grow at 4%, inflation runs at 2%, and you live 'til you're 90, you need $1.6 million in the bank at age 40 to be able to retire, and that leaves you with absolutely no margin for error. No big investment drawdowns; you need a fully paid-off place to live; and you need to bump yourself off on your 90th birthday.
A more realistic assumption is you'll need $2 million at age 40, and even then you're not exactly going to be living large.
Every year you postpone retirement makes it easier to retire. If you retire at 65 like a normal person, keeping all other assumptions the same, you only need $1.1 million in the bank at a minimum; so you need half a million less, and you've got an extra 25 years to earn it.
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Retiring at forty is not a thing that normal people do. The only people who have ever been able to do that are:
1) Maniacal savers who don't mind living on a shoestring; or,
2) People who inherited it.
And retirement is a big change in your life! You need to figure out what you're going to do with your days, because you're not working any more; and where the money's going to come from - because you're not working any more!
Let's take a look at Mr Money Mustache, because that tends to be where all of this "I can retire in my late thirties" rubbish springs from. He lives in Colorado, where housing is inexpensive (less than half what you'd pay in Singapore, at a guess); he and his wife both saved like crazy for over a decade, living on a shoestring and basically being miserable; and he's not "retired" in any sense, he runs a giant fricking multi-channel multi-media personal finance empire that throws off hundreds of thousands of dollars a year. That's not retirement! It's a full-time job!
And for most people, their forties are their peak earning years; leaving the workforce before then means you're sacrificing your prime earning years when you could—and should—be padding your retirement coffers.
It makes me irrationally angry that people see examples like that and think "oh I can retire at forty too". For normal people with normal jobs, "late sixties" is a reasonable retirement age. Maybe even early 70s if you're still feeling sprightly.
Some might also be concerned that this means that their peers will get promoted while don't, but these are the small concerns of cubicle dwellers...
