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Friday, May 31, 2019

FI is good; RE - not so much

This is not going to be one of those insipid articles telling you to pursue your passion after you FI. Or to warn you about the perils of the paralyzing boredom. Oh please no.

You know, because I understand perfectly that we are all wired differently, and not every one has a calling to save dolphins, write novels, build schools in Cambodia, start a music band, etc.

Some of us simply have no (great) passion for anything in particular. Like ASSI, i reckon my retirement would consist mostly of MMORPG-ing and trying out yet another build in Skyrim (only to end up as a stealth archer yet again).

It is worth repeating that, no matter how fervent one's passion might be, if you have to do it five times a week, 8 hours a day, you'd tire of it soon enough. All a job does is to kill whatever passion you might have once held for that type of work.

But nuff said about jobs. Summary: Jobs are bad. Sloth is good. But yet, it seems that the modern society will always require one to hold a job. It might not be the high paying job that you so loathe, but a job is needed nonetheless.

Chris of Tree of Prosperity recently wrote about his first world problem of having to jump through bureaucratic hoops just to engage domestic help. I had no idea (nor do i understand the rationale for it) that you needed an IRAS statement or proof of a FD account with 50k just to engage domestic help.

It got me thinking about the other things that one might find difficult to do as a retiree, aka, unemployed person.

1) Buying a home

As Singaporean as it sounds, renting is not a long term solution to one's housing needs. However, to purchase a home, a loan is inevitable unless you belong to the aristocratic 1% class (in which case, why are you reading a FIRE blog, to laugh at us peasants?). I am not optimistic on the bank's willingness to loan to an unemployed person. Even if said unemployed person could produce a yearly dividend statement from CDP showing substantial dividend income.  I am not familiar with this issue, but assuming a loan could be successfully procured, how would the TDSR be calculated? If any retiree has experience in this aspect, please feel free to share in the comments.

2) Refinancing a mortgage

Some people have told me that the solution to the first problem is to buy the home before you throw the letter. Fair enough. But what about when you need to refinance? Don't the same issues crop up?

3) Buying a car

Okay, I suppose this is almost a non-issue compared to having a roof over your head. But the fact remains that for someone who is retired, you probably have to stump up the entire car value on purchase, and foregoing the "discounts" usually applied by smooth-talking car salesman when you take up a loan with one of their financial institution bed fellows.

4) Applying for a credit card

So some bank introduces this new fantastic miles card, with 5% cashback on all purchases and auto-waived annual fees?!?! OMFG. Shut up and take my money application.  Oooooh sorry, but there is a qualifying income criteria.

5) Taking advantage of stock market corrections

This is perhaps the most salient issue to FIRE adherents. When you were working, you could rely on active income to keep a warchest that routinely increases/replenishes itself.  As a retiree, even if you manage to run a surplus on your passive income, chances are the rate of the warchest accumulation is going to be substantially impaired.  The end result is that you can't take advantage of irrational market dips (like the current one).

For instance, right now, I am accumulating my earned salary in preparation for a full scale assault on DBS at my target entry price. 5% yield on a blue chip SG bank? SAY NO MORE FAM.

In the absence of active income, I may have to resort to selling some of my other holdings to recycle capital.  The problem with that is if DBS is sinking, chances are the rest of the market is also tanking. Are you prepared to sell when the market is lao-sai-ing? Didn't think so.

Hence, while reaching FI as soon as possible is good, it is much less clear as to whether one should RE upon FI.

Luckily for those who have not reached FI (myself included), this is a consideration that only needs mulling over at a much later stage.

Onward to FI friends!


  1. for retiree buying a private house, one way of getting a loan is to "show cash" (via bank statement) to the bank you want to get loan. precisely what % on your cash balance, the amount the bank willing to loan you will depends on each individual bank itself, thats one way.

    1. i'm not sure about HDB housing though, but i'm sure its not too difficult to own a HDB home espeacially if you are married.

    2. Thanks for the helpful comments. Will certainly try this when I finally take the plunge to become a homeowner.

  2. Can consider FIRe after Point X upon reaching FI. Once we reach FI; the motivation to work long hours slogging at full-time job for more money may not be there anymore.

  3. One way is to start a private company, funnel cash into it and draw salary from it to show statement

    1. That's something i have not thought of. Drawing a salary through the private company may attract income tax, which I would like to avoid as far as possible. But certainly an option worth exploring.

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