Greetings and many thanks for taking a look at my scenario. Investing super novice here. 4 months ago the Mr. Money Mustache site opened my eyes to the possibility of FIRE and I have been reading boards, blogs and sites to understand the basics. Until I ran my numbers through FIRECALC, I just assumed it was work until mandatory retirement. It has been a major haul to get myself in order to the point I could present this humble request for the MMM experts to take a look at my scenario. It’s as thorough as I could be, so apologies if too much or too little detail.
Background: US citizen currently working in Thailand. In Asia 28 years. Prior have worked in Philippines, Vietnam, Singapore and Japan. Married to Japanese national (not a citizen or Green Card holder) who is a full-time housewife. No kids.
Age: Me – 51. Spouse – 56.
Tax Filing Status: Married Filing Jointly.
Tax Rate: 25% US Federal for US tax exposure // 0% State as I am not a resident
Debt: None.
US Retirement: Will not be eligible for US Social Security or Medicare.
Housing and Core Costs: Rent = USD 2000/month. Utils/Cable/Internet/Mobile = USD 500/month. This could be reduced, but our apartment is in the center of Bangkok, so no need for car and can use public transport. Our apartment provides all maintenance, so no cost for furniture, major appliances, aircon maintenance, etc. We plan to be renters for life.
[ A ] Situation: Employed relatively happily. My post-Thailand/US tax income is USD 100k/year. I would prefer to work another 8 years until 60 (which is mandatory retirement age here and will garner a huge payout from Megacorp), but there is a higher probability that I will be retrenched before that (with a post-tax payout of about USD250k). In the event I get retrenched, I want to be pre-positioned to pull the plug and FIRE in Thailand. With that in mind, I have been taking prep steps such as setting up bank accounts, getting local credit cards and preparing paperwork for Retirement Visas.
[ B ] Current Assets/Benefits:
(1) Cash – USD 1.1m. 80% in Singapore. 20% in US. 5% in Thailand. I plan to repatriate most of the Singapore account to US as the exchange rate is favorable, so will have USD 1m cash in US shortly. Why so much cash? Until now, I just didn’t know where I would be working next nor where I would choose to retire, so I kept everything liquid if I wanted to purchase a property (which I now know I won’t do). If I stay in Thailand, will need to keep USD 50k (25k + 25k) in bank as a guarantee condition of my/spouse’s retirement visa, so the 5% of Thailand cash will be parked here along with living money.
(2) Singapore Central Provident Fund – USD 425k cumulative for my/spouse accounts. CPF is Singapore government retirement savings account. As we turn 65, the account is annuitized and will be paying minimum 12k/year for my spouse and 18k/year for me, so basically USD 30k/year from 2032. These payments will be paid for life, will be inflation-adjusted +2% annually, have death benefit until 80yo and be tax free (I have been paying US tax on contributions and interest, so no more US tax burden). Having this payout in Singapore Dollars is also a more stable Asian currency against the Thai Bhat.
(3) Thailand Retirement Accounts – USD 100k. These are company-sponsored Roth-type IRAs invested in Thailand exchange stock/bond funds. These will not be taxed in Thailand and will only be US taxed for withdrawal of capital gains as I already pay US taxes on company matching contributions. I am growing this by USD 40k/year of contributions. Similar to Roth IRA, these accounts cannot be used until I am 60yo.
(4) Megacorp’s Stock Purchase and Matching – USD 75k of a single international stock. Starting in 2019 matching shares will start to vest, so this will grow by USD40-50k/year with purchases and vesting. #3 and #4 give me a good chunk of international exposure.
(5) TOTAL Current Nest Egg = 425k + 1.1m + 100k + 75K = USD 1.7m.
(6) Medical: While employed, myself/spouse covered by local company-sponsored medical insurance. If I FIRE, as part of CPF in Singapore I have USD 50k in what is known as Medisave (roughly equivalent to a US HSA account). The perpetual interest on this account pays for MediShield policies for both of us (nearly equivalent to Medicare), so if one of us needs major surgery, we could get it done in Singapore. Otherwise, we will self-insure. Costs of first-class medical care is cheap and Thailand is a global medical tourism hub. To compare, both my mother and wife had spinal fusion surgery 3 years ago – the cost in the US was USD 110k for my mom and the cost in Thailand was USD 11k for my wife. Same situation with prescription drugs – fraction of the price.
[ C ] The Challenge:
(1) I have set up accounts at Vanguard, Schwab and Fidelity. Schwab/Fidelity looks optimal for me because of the 24/7 phone/chat service and fee-free access to overseas ATM withdrawals. VG is really my preference, but they are closed during Asia daytime hours and their site is forever under maintenance during these hours, not to mention that their operations seem to be geared for the pre-Internet pre-App era. I will probably use multiple providers based on their specific product strengths. VG will play a part for the stuff I just want to buy and forget.
(2) Every US-based investment I make will only be eligible for a taxable brokerage account as US IRAs require US earned income. Foreign earned income is ineligible and my gross income is slightly too high, so no Roth or Traditional IRAs. So managing taxes is a big consideration (I have read the Boglehead guide on tax placement considerations), but specific recommendations would be appreciated.
(3) I want to work on very risk-averse scenarios. I have gotten my nest egg the hard way and if/when we FIRE, we will be on our own in a foreign country with zero family/friends that would bail us out, so every scenario I have calculated for 40-year spans to 100% success in FIRECALC with spare (which I have not included above). As I see the market right now, equities are super high CAPE and bouncing. At the same time, rising interest rates are depressing bond fund NAVs. I want to virtually remain on the sideline until the big spurt of interest rate hikes completes this year and the mid-term elections show any change.
(4) Expected Spending (Worst Case) if Megacorp retrenches me tomorrow: USD 5,000/month, inclusive of housing/core costs, so USD 2,500/month discretionary. Current nest egg supports this 100% in FIRECALC. In fact, if I include the USD 250k post-tax retrenchment package (have already quietly confirmed my rights with HR), monthly is USD 5,500/month at 100% in FIRECALC.
(5) Expected Spending (Best Case) if I can make it to 60yo retirement: USD 7,000/month, inclusive of housing/core costs, so USD 4,500/month discretionary. Current nest egg needs to grow about USD 700k by age 60 for this to be 100% in FIRECALC. This would support a heavy foreign travel lifestyle as we love to see new places. As we get into twilight years, this extra spend will fund caregivers in lieu of a nursing home.
(6) Note that Thailand is a very reasonable inflation economy. It is possible to live very extravagantly, but also very easy to tone down lifestyle.
[ D ] WHERE I NEED ADVICE:
(1) FIRECALC assumes 75/25 stock index to bond fund ratio, which I believe has an assumption on return. This is what I don’t know and thus my key question. How do I convert the Cash part of my assets into a portfolio while making the most principal-preserving steps given my risk-averse views? I just can’t dump everything into 75% VTSAX and 25% VBTLX, at least not without feeling like a gambler. Here are some of my thoughts…
(2) I can see plenty of options now for 2% 1-year term to 3% 5-year term CDs (up to 3.4% on 10-year term). Does it make sense to put the whole lot in a CD ladder (heavy on 6-12 month for a 2% return) with the balance in 2-5 year for a circa 2.6% return)? Can just having CDs work out in a worst case scenario?
(3) My other thought was to do a large scale version of dollar cost averaging by putting 100-150k/year into stock index while keeping the rest in CD ladders. If the stock market tanks, then I can even consider to break a couple CDs to get into equity quicker (and hopefully cheaper). This way after 5 years I will get to 50-60% stocks and then have the rest in CDs or bonds such as iBonds/etc. In the intervening years, I get predictable CD return and don’t lose any sleep.
(4) Any other ideas or advice? I see this whole thing as a hot tub that I want to ease into. Diving into the deep end is damn scary. I appreciate that I can’t expect returns without risk and don’t expect there are any magic bullets. Just looking for a conservative pathway.
Much appreciated for reading through my mini-tome and will be very grateful for insights.