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What Material Success Means to >50% of Young Singaporeans and How Much It Costs

profileJoel Koh

Move over 5Cs. 

Today’s youth have a slightly different definition of career and material success, according to the recent TODAY Youth Survey 2021.

For this survey, the news outlet polled:

1,066 respondents aged between 18 and 35 at the start of October (2021) about their views regarding various social issues, their goals and their sentiments about the pandemic.

The wide-ranging survey, which is demographically representative, covers six topics: Racism, religion, LGBTQ (lesbian, gay, bisexual, transgender and queer) attitudes, gender dynamics, the impact of COVID-19 on mental well-being and social ties, and career and material success. 

By and large, the survey findings painted a picture of the younger generations still grappling with the emotional, mental and economic impact of living through a crisis that has affected every aspect of their lives.

In addition, the surveyors polled respondents about what they thought the top indicators of career and material success were in Singapore:

Source: TODAY

More than half of the respondents polled answered that having enough money to retire early and a passive income from financial investments were the top two indicators.

Safe to say, these two goals would require a considerable amount of money to achieve.

But how much exactly?

The answer might surprise you.


TL;DR: What Material Success in Singapore Means to Most Youth and How Much It Costs

  • More than half of young Singaporeans aged 18-35 define career and material success as
    • Having enough funds to retire early (59%) and/or
    • Having passive income from financial investments (52%).
  • But to retire early, you would need a massive amount of capital.
    • For example, you will need anywhere from $727,272 to about $2.2 million if you plan to spend between $2,000 and $6,000 a month during retirement.
  • If you want to get a passive income from financial investments, you can consider building a dividend income portfolio.
    • But you will need anywhere from $200,000 to $1.5 million if you want dividend payouts ranging from $6,000 to $120,000 a year.

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any investment product.


What Do Young Singaporeans Want?

Granted, the results of the survey must be read in the context of the COVID-19 situation.

In an interview with Today, Mr Praveen Nair, a counsellor at Raven Counselling and Consultancy, stated that:

a few of our “positive weights” such as socialisation and career stability have been partially taken away from us and more “negative weights” such as depression, job instability and loneliness have taken the place of those positive weights.

Thus, it is not surprising that having ‘enough funds to retire early’ and ‘achieving a passive income from financial investments‘ are the top priority for the youth in Singapore.

After all, you have to remember that achieving these financial goals is just a means to end a desirable lifestyle.

Once you have enough funds to retire early or have enough passive income streams, it opens up a sea of options as work become optional.

Financial Independence Retire Early in Singapore (FIRE): FIRE Movement Explained

First up, let’s address the elephant in the room.

About three out of five young Singaporeans indicated that having enough funds to retire early was the top indicator of material success.

Naturally, this would mean that they want to achieve Financial Independence Retire Early (FIRE) in its original form or traditional FIRE.

Source: Strong Opinions Loosely Held | Giphy

For the uninitiated, the Financial Independence, Retire Early (FIRE) movement is a lifestyle movement whose goal is financial independence and retiring early.

  • Financial Independence: The status of having enough income to pay one’s living expenses for the rest of one’s life without having to be employed or dependent on others.
  • Retire Early: In Singapore’s context, the ‘official retirement age’ is 62 years old. Thus you can think of early retirement as anything earlier than 62. Most aim for 45 to 50 years old as a realistic FIRE age.

Before continuing, it is essential to understand the wealth ladder in detail and take note of Level Five, which is Financial Independence, where your passive income generates enough to cover your current living expenses.

Stages of The Wealth Ladder

LevelStageDefinition
5Financial FreedomYour passive income from wealth assets cover current living expenses + your life goals
4FINANCIAL INDEPENDENCEYour passive income from wealth assets cover current living expenses
3Financial SecurityYour passive income from wealth assets covers basic living needs (water, utilities, bills)
2Financial StabilityYou have emergency fund savings of 6 months
1Financial DependencceDebt Payments consume you, and is more than your own Income

Cost of FIRE in Singapore

Many followers of the FIRE movement suggest that you would need to save about 30 times your estimated annual living expenses at the point of your desired retirement age.

Based on this formula, you will be able to withdraw 3.3% of your investment portfolio to cover your yearly expenditure without touching the initial capital you have invested.

Why 3.3% specifically?

Well, according to a recent Morningstar report, The State of Retirement Income: Safe Withdrawal RatesMorningstar researchers Christine Benz, John Rekenthaler and Jeffrey Ptak estimated that.

using forward-looking estimates for investment performance and inflation, we estimate that the standard rule of thumb should be lowered to 3.3% from 4.0%.

Assuming a balanced portfolio, fixed real withdrawals over a 30-year time horizon, and a 90% probability of success (that is, a high likelihood of not running out of funds over the time horizon).

This is the Safe Withdrawal Rate (SWR): the estimated percentage of your net worth that you expect to withdraw to cover your living expenses in retirement.

So, for example, you can simply refer to this chart to understand the approximate FIRE amount you need if you would like to retire early:

Monthly ExpensesYearly ExpensesYou Will Need
(~30X Yearly Expenses)
$2,000$24,000$727,272
$2,500$30,000$909,090
$3,000$36,000$1,090,909
$4,000$48,000$1,454,545
$5,000$60,000$1,818,181
$6,000$72,000$2,181,818

To help you figure out how much you need to FIRE, you can also refer to our Financial Independence Retire Early (FIRE) guide and use this excellent FIRE calculator made by Andrew, the author of WalletBurst.

Here are a couple of Andrew’s assumptions that I have localised:

  • ‘On the left, start by entering your current age and the age you plan to retire.
  • Then enter the amount you plan to spend annually in retirement.
  • In the Current Invested Assets box, enter the amount that you currently have invested. For example, if you have S$100,000 invested in the stock market and S$25,000 saved in your emergency fund, you should enter S$100,000 in this field.
  • Use the sliders to adjust the rates and watch the graph to the right immediately react to your change!
  • The investment rate of return is the average return you expect your investments to grow, not adjusted for inflation.
  • This calculator uses 7% as a default Investment rate of return, a relatively conservative assumption. Historically, the S&P 500 has returned on average 10% annually from its inception in 1926 to 2018.
  • The inflation rate is the average annual rate of inflation that you expect to experience in the future. Historically, Singapore’s average inflation rate from 1962 – 2021 stands at 2.5 per cent (via Trading Economics).
  • Safe Withdrawal Rate (SWR) is the estimated percentage of your net worth that you expect to withdraw to cover your living expenses in retirement. 3.3% can be widely considered as the recommended SWR for retirement planning going forward, according to research from Morningstar.
Source: WalletBurst

As you can see above, achieving an early retirement is not easy.

You will have to hustle and work really hard and smart for the first 10 years of your life if you want to retire at 35, 40 or your desired retirement age.

This involves quite a bit of sacrifice as you might have to typically forgo short term comforts and be remarkably frugal about spending depending on how much you earn,

 

Source: TracyBennet1 | Tenor

Not to mention that you will need to save aggressively and invest to achieve financial independence and retire early.

While this is achievable, you will have to forgo many comforts and face the risk of burnout and health issues in the pursuit of traditional FIRE.

Balance is key.

How To Earn Passive Income From Investments

The next most popular indicator would be to achieve a passive income from financial investments.

One way to achieve a passive income from financial investments would be to build a dividend income portfolio.

Dividend stocks are stocks that give dividend payouts based on their profits over the year. Should an investor invest in a dividend stock, he receives income in dividends given out by the stock.

The Rule of the Dividend Income Portfolio Building Game

Imagine this: Your investment portfolio gives you enough every year to a point where you no longer have to depend on your salary for your expenses.

That is the goal of every investor, and this is how to build a dividend income portfolio:

  • Certain stocks give dividend payouts based on their profits over the year.
  • Investors can use his prefered method to identify and screen out solid stocks and investment instruments to invest in.
  • From there, investors will build their investment portfolios.
  • The objective is to create an investment portfolio that can replace your expenses and salary.
  • Once that objective is achieved, financial freedom may not be too far away!

So here is how much you need depending on the dividend you desire:

Granted, this is just an overview.

Do read our full article for a more in-depth look at this strategy.

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About Joel Koh
History student turned writer at Seedly. Before you ask, not a teacher. My time as a history student has equipped me with the skills to evaluate the impact societal development has on financial and nonfinancial events.
You can contribute your thoughts like Joel Koh here.

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