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The Rule of 25

Anyone who is remotely interested in FIRE would have come across this so-called Rule of 25.

In short, it is alleged that, in order to retire comfortably, one will need a nest egg amounting to 25 times annual liabilities.

E.g., if you require $4k a month to meet all your liabilities including mortgage, parent maintenance, health insurance, bills, transport and personal spend; for you to even contemplate hanging up your gloves, you will require a nest-egg of:

$4k x 12 x 25 = 1.2 million bucks.

But because I am Asian and Asians scoff at being average, we should raise our monthly liabilities by 50%.  Basically, if you want to retire comfortably, you will require

6k x 12 months x Rule of 25 =  1.8 million.

1.8  million? meh

Is 1.8 million a pipe dream? Probably yes for the vast majority of Singaporeans. The median income in Singapore is roughly 4k. Assuming one is able to save 50% of that (which is a massive assumption), the annual savings would be around $24k.

If you are an amazing investor capable of returning 8% on your invested capital annually, it would only take you a mere 26 years to hit 1.8 million and reach FIRE.

So fret not. If you are an average income earner, you would only need to spend 30 years of your life slaving away so that you can, well, stop working.

If it sounds bleak, it is because it is.  For anyone looking to retire by 40, a high income is unfortunately essential. Either that, or you strike TOTO. 

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