Case Study - How Can I FIRE in Thailand?

[ThaiSmile]

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.

[2Cent]

While the dollar is generally more stable than the Bhat, it is a currency risk you're taking. However, I think the real cutting of risk is in seeing how you could survive with less for a certain period. It seems to me that 5k or even 7k is quite high for someone who is retired and could live anywhere in Thailand(or the world).
I would map out what the actual risks are that you are trying to avoid and try to mitigate those specifically. Saving so you could deal with any conceivable situation is quite costly. Let the option to reduce expenditure be your safety margin as it is not likely it will be much needed.

[expatartist]

OP, your plans seem quite well laid out. Good to have investments in different currencies. Paperwork for Thailand should be straightforward. You know all these countries well and have spent years in the region. I agree it's easy to reduce expenses easily in Thailand and still have a very high quality lifestyle. Perhaps as the other poster mentioned you might want to have a closer look at what an under-5K budget might look like for you both. Maybe a cheaper flat? Or slow travel / overland / travel hacking / flashpacker vs. having a large budget for it.

If you can keep your budget to that lower number, you look to be set regardless of what happens with your job. Are you interested in doing consulting work after finishing with Megacorp?

[ThaiSmile]

While the dollar is generally more stable than the Bhat, it is a currency risk you're taking. However, I think the real cutting of risk is in seeing how you could survive with less for a certain period. It seems to me that 5k or even 7k is quite high for someone who is retired and could live anywhere in Thailand(or the world).
I would map out what the actual risks are that you are trying to avoid and try to mitigate those specifically. Saving so you could deal with any conceivable situation is quite costly. Let the option to reduce expenditure be your safety margin as it is not likely it will be much needed.

Agree with the currency risk highlighted by you and @expatartist . I came to SE Asia just as the currency crisis was in full swing in 1998 and saw a lot of expats go from currency riches to rags as the Bhat slid by 25% from 40 to 30/1 USD. My strategy is twofold: (1) Large portion of income will come from Singapore CPF annuity where the Singapore Dollar is much more stable against the Bhat and (2) Decent portion of nest egg will be in Thailand accounts, so not prone to currency fluctuation.

Much appreciated for the revert. If I get the ax sooner than I want, will be prepared to moderate lifestyle. Much appreciated!

[ThaiSmile]

OP, your plans seem quite well laid out. Good to have investments in different currencies. Paperwork for Thailand should be straightforward. You know all these countries well and have spent years in the region. I agree it's easy to reduce expenses easily in Thailand and still have a very high quality lifestyle. Perhaps as the other poster mentioned you might want to have a closer look at what an under-5K budget might look like for you both. Maybe a cheaper flat? Or slow travel / overland / travel hacking / flashpacker vs. having a large budget for it.

If you can keep your budget to that lower number, you look to be set regardless of what happens with your job. Are you interested in doing consulting work after finishing with Megacorp?

Replies from you and @2Cent giving me a boost of confidence. As I have been working here for the past 2 years, I have observed that Thailand is generally a stable/deflationary economy. Basics like rent have not budged (and if it did, there are literally hundreds of flats open nearby). And what is more important is the more I live here, the more I discover cheaper/better options for living. So agree wholeheartedly that lifestyle adjustment is the most important factor, especially in the worst case situation that I get retrenched earlier.

On the point about consulting, would be open to it, especially if I get an early retrenchment. Teaching. Project Management. If I make it to 60, I will prefer to do volunteer work. Will have to see how the wind blows. Many thanks.

[texxan1]

Do you want to stay and retire in BKK. So many places to live in thailand that are much cheaper as you know... I spend my time between phuket and Chiang Mai, and if it wasnt for the GF.. I would stay in chiang mai where its not as busy, alot cheaper and everyone is happy.

sounds like you could put all into a vanguard accout and live just off your interest without even withdrawing anything from principal amount.

You looking good, just need to see where you land forever after megacorp

Tex

[ThaiSmile]

Do you want to stay and retire in BKK. So many places to live in thailand that are much cheaper as you know... I spend my time between phuket and Chiang Mai, and if it wasnt for the GF.. I would stay in chiang mai where its not as busy, alot cheaper and everyone is happy.

sounds like you could put all into a vanguard accout and live just off your interest without even withdrawing anything from principal amount.

You looking good, just need to see where you land forever after megacorp

Thanks @tex! Good to hear from a fellow Thailand resident. We are likely to stay in BKK even after I retire. We both like the constant hum of the city and being near all of the conveniences of the Japanese expat area (grocery, books, etc.) keeps my wife happy. I have visited CM and Phuket which are great for visit, but think my wife would struggle there.

My hope is to keep the megacorp gig going for another 3 years at least. Job is tolerable, so I can push on. Whether I can do that with organization changes happening is not for sure. Whatever the case having my F-You money banked helps me rest peacefully. My concern always is being in a foreign country without active income. Somehow it just seems intimidating and so I keep looking to buffer for safety. Honestly I am waiting for external forces like retrenchment. Until then, I will remain attached to the megacorp teat. Stay happy and healthy!

[mjb]

(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.

. . .

(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.

Red-flag comments emphasized.

First of all, let me congratulate you on both your savings, and for designing what sounds like a great life for yourself! We should all be so fortunate.

Obviously you have a very particular tax situation which complicates the specific location of your investments, but the underlying investment philosophy shouldn't be too different from most any other investor.

I would humbly suggest that before you make any investment moves, you read a bit more and work on 1) adjusting your definition of "risk", and 2) as JL Collins says, "adjust your pyschology to your investing, rather than adjusting your investing to your psychology."

For instance, "staying on the sideline" is not a risk-less position. Neither is sitting on large amounts of cash. Perhaps you don't need to be 75% stocks - but you do need to rationally determine your need, willingness, and ability to take risk.

The Simple Path to Wealth and The Bogleheads Guide To Investing are great starting points. William Bernstein's The Four Pillars of Investing is more advanced, but terrific as well.

And while I generally find the attitudes there overly conservative and... unexciting, the bogleheads.org forum has a larger community of people in a situation similar to yours. I would suggest making this same post there to get some other perspectives, especially as it relates to your tax situation.

Regardless of your future moves, it sounds like you are in a fantastic position to do whatever the hell you want! Live it up!

[expatartist]

I can understand your wife's unwillingness to consider Chiang Mai, it is much smaller than Bkk, cultural and other amenities aren't so impressive. But there is a sizable Japanese community in C.Mai, has been at least since post-WWII. There are Chiang Mai publications in Japanese for tourists and residents, I encourage you to spend some quality time there as a couple to explore the Japanese experience of the city if you're interested.  If the move is framed as "better quality of life" (less polluted aside from spring when farmers burn fields, more relaxing, great minority cultures nearby etc) rather than "easier to afford" she might find some potential.

[ThaiSmile]

I can understand your wife's unwillingness to consider Chiang Mai, it is much smaller than Bkk, cultural and other amenities aren't so impressive. But there is a sizable Japanese community in C.Mai, has been at least since post-WWII.

Thanks for the insight. Will have to visit there with the wife and see what she thinks. When I was there I had the super-tastiest burger at Beast Burger. Worth going back just for that. Thanks and much appreicated.

[ThaiSmile]

(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.

(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.

Red-flag comments emphasized.

First of all, let me congratulate you on both your savings, and for designing what sounds like a great life for yourself! We should all be so fortunate.

Obviously you have a very particular tax situation which complicates the specific location of your investments, but the underlying investment philosophy shouldn't be too different from most any other investor.

I would humbly suggest that before you make any investment moves, you read a bit more and work on 1) adjusting your definition of "risk", and 2) as JL Collins says, "adjust your pyschology to your investing, rather than adjusting your investing to your psychology."

For instance, "staying on the sideline" is not a risk-less position. Neither is sitting on large amounts of cash. Perhaps you don't need to be 75% stocks - but you do need to rationally determine your need, willingness, and ability to take risk.

The Simple Path to Wealth and The Bogleheads Guide To Investing are great starting points. William Bernstein's The Four Pillars of Investing is more advanced, but terrific as well.

And while I generally find the attitudes there overly conservative and... unexciting, the bogleheads.org forum has a larger community of people in a situation similar to yours. I would suggest making this same post there to get some other perspectives, especially as it relates to your tax situation.

Regardless of your future moves, it sounds like you are in a fantastic position to do whatever the hell you want! Live it up!

Many thanks @mjb. I posted the same on Bogleheads and the advice was very similar vis-a-vis getting into the market with a risk-tolerable allocation. I just had a visit from my Boss last week and it appears that there will be no earthquake-type happenings like retrenchment coming this year. I also informed him that I am not keen to move out of Thailand, even if it means my risk of retrenchment is increased. If they don't want to keep me, then they can pay me and I will make my decision to RE or find a new job. Until then, I will be content to keep working.

So I have decided that I will get to 40-50% equity by end of 2019 with the remainder in shorter-term bond funds. In reality, if I can stay 8 more years with the megacorp situation to mandatory Thailand retirement age of 60, I will have lived out the first 8 years of virtual retirement with the ability to replenish/recover from most downturn situations, which should take much of the sequence of return risk out of the equation. By 60, not only will the nest egg grow and there will be a substantial megacorp payout, but my wife's Singapore annuity will start so I should be in a good stable situation to go into drawdown phase. Let's see how it goes. Much appreciated for the advice and hope to "Live it up" to the fullest. Cheers!