We've been talking a lot in our community on the accumulation phase throughout our working life, either by choosing the right investment product or getting the right insurance protection but there is hardly a discussion on the decumulation phase. 

The two are linked because our life is finite in nature, thus there is a need to determine how much we need for the expenses and start working backwards how much we should be accumulating in the earlier phase of life. 

These plans will differ from each household to another, depending on the traction of how much you need, how long you live, how much you can earn and how much you are comfortable with. Goals and plans are also a moving target, so it is common that they will change from time to time, though unlikely to be drastic if you think through and plan properly. 

I'll share about how I plan for my drawdown in the decumulation phase of my planned early retirement lifestyle. This is just based on what I think, so I leave the part off from my wife side where she'd be also able to contribute once her business takes off to the height she wants but for conservative purpose I've left that part out.

• Assuming I stop my corporate lifestyle at the age of 35 and receives no active income thereafter

• Portfolio of $1M, with a yield of 6% - This would yield me a base of $60k per annum

• Aiming for a portfolio growth of 5% per annum on average

• Side Income Hustling yielding ~ SGD500 a month (or $6k a year). 

• Income to Expense Ratio at 1x, with inflation growth at 3%

• Partial withdrawal on capital from the age of 50 at 3%

• CPF payout from 65 onwards, which is minimal

• Life Expectancy until 90

Comments: The least likely scenario embedded the opportunity to get out of the rat race much earlier and live off the rest of the expenses through mainly dividend income. The portfolio will still be growing marginally while this method will probably embed partial withdrawal on the capital once we entered the second half of the retirement lifestyle. It is unlikely that there will be anything significant from what the CPF can support since our contribution will be very minimal so not much dependency will be hinged on this.

or 

• Assuming I stop my corporate lifestyle at the age of 35 and receives no active income thereafter

• Portfolio of $1M, with a yield of 6% - This would yield me a base of $60k per annum

• Aiming for a portfolio growth of 5% per annum on average

• Side Income Hustling yielding ~ SGD500 a month (or $6k a year). 

• Income to Expense Ratio at 2x, with inflation growth at 5%

• No Withdrawal on capital

• No dependency on CPF Payout

• Life Expectancy until 90

• Move to neighbouring retirement countries

Comments: The other alternatives is to move to a neighbouring countries and set up some side hustling business there. Expenses are low so the income to expense ratio should easily settle for the rest of our lives. There is also no expectancy on the withdrawal of the capital and any dependency on the social security retirement.

• Assuming I stop my corporate lifestyle at the age of 37 and receives no active income thereafter. 

• Portfolio of $1.2M, with a yield of 6% - This would yield me a base of $72k per annum. 

• Aiming for a portfolio growth of 8% per annum on average. 

• Side Income Hustling yielding ~ SGD500 a month (or $6k a year). 

• Income to Expense Ratio at 1.2x, with inflation growth at 3%. 

• Partial withdrawal on capital from the age of 50% at 3%. 

• No dependency on CPF Payout. 

• Life Expectancy until 90. 

Comments: This is nothing much different from the above except I build my margin of safety through continue working for corporate while building the capital bigger. The incremental increase of $200k by working for the additional 2 years is just a random estimate figure which I rounded up from my head but if our dear bear market comes early, we might just reap the benefits much earlier. I think with an income to expense ratio at 1.2x, it also builds up savings during the month which can be ploughed back into the portfolio to compound further.

• Assuming I stop my corporate lifestyle at the age of 40 and receives no active income thereafter. 

• Portfolio of $2M, with a yield of 6% - This would yield me a base of $120k per annum. 

• Aiming for a portfolio growth of 10% per annum on average. 

• Side Income Hustling yielding ~ SGD1000 a month (or $12k a year). 

• Income to Expense Ratio at 1.5x, with inflation growth at 3%. 

• No withdrawal on capital. 

• No dependency on CPF Payout. 

• Life Expectancy until 90. 

Comments: This is building up a larger safety net and will definitely score on getting retirement settled and out of the way for the rest of our lives. Again, the market will play a big role because the faster the bear market comes, the easier to compound the returns for future years since we are buying at cheaper valuation. I am also expecting some side hustling to pan through over the years and should contribute quite significantly to our income. We still have back-up plans from our capital withdrawal strategy and CPF which remains our fall back options should we need to.

This is just something which I have in my mind right now. 

There will definitely be changes in plans along the way and we'll play by it but we believe nothing should be as drastic. 

The fact also that when I stop working means there will be no contribution to the cpf, so that is something which has to be accounted for as well via the cashflow and included from it. The good thing about it there will also be no tax expense from my part so that should mitigate some of the losses.

Ideally, we prefer if we do not make any drastic changes to our lifestyle in the pursuit of this whole early financial independence thing but we'll have to see as we goes.

The big wildcard here will still be how my wife business will take off.

Thanks for reading.