The ideal amount that I need to retire is to have RM4 million by the age of 40 with no debts. Once I have retired, I will be traveling the world & I aim to travel to at least 200 countries before I die. It is just 5 years from now before my ideal deadline & I have been working really hard to ensure I am able to achieve this goal. Why did I choose RM4 million?
My calculation is simple. To travel the world, I need around RM160,000 per annum. To earn RM160,000 a year based on Fixed Deposits & other investments, I assume that my average investment return per year is 4% per annum based on lower-risk investment return. RM160,000 x 25 = RM4 million.
In the current situation, there are multiple arguments that the 4% rule is no longer feasible due to lower market return & other multiple reasons. Prior to the pandemic, Fixed Deposit rates were at an average of 4% per annum while FD returns are currently between 1.3-1.8% per annum. There are some stocks that have also underperformed during the pandemic which resulted in lower investment returns. If you are currently retired & fully relying on investment return, your return might be lower than 4% for the past 2 years.
Looking at the article, the 4% rule might no longer be feasible. Do you agree with it? The market can be unpredictable & for the past few years, we had great investment return years & had a bad one as well. If you have a diversified investment portfolio, your investment risk can be lower if you invest in the right sector. With the market unpredictability, what do you think you can do better if such an issue is repeated in the future? Or imagine, if you are retired when such an issue happens again, what can you do better?
I did ask myself a similar question as I personally experienced lower investment return despite gaining some & losing some in my investment return, however, I am still having some profit from my investment. Despite my business was not able to operate for a few months due to the pandemic, my overall business is still able to be profitable. Assuming that I am able to retire today with RM4 million, my expected return for the current situation is expected to be lower than 4%. It is definitely not feasible if I were to follow the 4% rule. Even if there will be years that my expected return can be higher than 4%, I personally don’t think that the 4% rule can be applicable anymore unless I can earn generate other passive income which I can spend 4 hours or less a week to work for such as my blog, YouTube channel or my other side hustle while I am retired. The 4% rule may or may not be feasible anymore but with the current lesson that we have learned, it is better for us to be more prepared just in case a situation like this will ever repeat. Like what we always learn in school, we should always “Sediakan Payung Sebelum Hujan”.
OSS!
You can also check out my latest YouTube video on How To Spot An Investment Scam In Malaysia:
