If I were to die now, my greatest concern will be my parents. My parents are in their 60s now. Should I meet a mishap, I hope to provide them with a monthly income of $3,000 for the next 20 years.
Assuming inflation rate at 3% and 0% investment return, I need a sum assured of $967.333.
Tool used: Excel spreadsheet or financial calculator
If I really have a term policy of $1m sum assured in place, my parents will be financially better off when I am dead. Currently, I am not able to comfortably provide them with a monthly income of $3,000... unless, somehow, my disposable income increases by 100%. I do not know how to achieve that yet.
= = = = =Retirement
If I were to retire at 62 and desire a monthly income of $2,500 after that for the next 25 years, I need $1,625,093 upon retirement. This amount is equivalent to $669,517 in today's dollar. To reach this retirement goal, I need to save $20,076 per year.
Assumptions: inflation rate of 3% and return on investment at 4%.
Tool used: Retirement savings interactive calculator on CPF Board website
= = = = =
Home Affordability
If my boyfriend and I decide to buy a new HDB flat now and allocate 20% of our combined income for loan repayment, taking into account the reduction in contributions to CPF-OA over the years, the maximum repayment period for our housing loan is 21 years if we wish to fund the entire loan with CPF-OA.
Assumption: combined income and CPF-OA interest rate of 3.5% remain constant over time.
Tool used: Excel spreadsheet
With a 20-year home loan, our maximum housing loan amount is $234,404.
Assumption: home loan interest rate of 3.0% p.a.
Tool used: Home Loan Interactive Calculator on CPF website
Based on the above, we can afford a new HDB flat of up to $325,629.
Tool used: calculator
6 comments:
I like your section on retirement planning. Save $20K p.a. is not difficult but you are starting very early (not married, no house and kids). CPF website has the cool template to validate the calculations.
When you are about middle-age, the sum is between that amount and the total sum for your parents' old age annuity. Works out to be about $50~60K pa until age 62.
Question is how come you wish your parents have $3K /mth and only $2.5K for yourself?
Lin-peh,
"My parents" = father + mother, so it's actually $1.5k for each of them, whereas "me" = me alone, not considering "future family and potential commitments". Futhermore, my dad has a mortgage to pay off, $3k/mth is not enough actually... =(
Can you explain the part of your comment on "When you are about middle-age, the sum is between that amount and the total sum for your parents' old age annuity. Works out to be about $50~60K pa until age 62."?
Say u r mid-age (42) and plans to save from now to age 62. And you expect to live for another 20 yrs @$2.5K /mth.
Exclude inflation and NPV of money, u need to save about $600k.
sorry I spotted an error.
Think I divided $600K by 10 yrs but 42=>62 is actually 20 yrs.
So it is only about $25K pa to save until 62.
$25K assuming some investment returns along the way
Hi Lin-peh,
If you are 42 and plan retire at age 62 with a monthly income of $2,500 for the next 20 years, you'll need $990,162 upon retirement, i.e. $548,229 today. Assuming you have no savings now, you need to save $31,972 per year.
(Other assumptions: inflation rate of 3% and return on investment at 4%.)
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