Will You Liquidate Your Entire Portfolio After You Have Attained Fat FIRE?

This piece is inspired by AK71 once again, who has recently released this video saying that he is considering liquidating his entire portfolio.  He is having such thoughts because his portfolio is sufficiently big enough to be placed into safer instruments like T-Bills or Fixed Deposits to eliminate/ minimize any market volatility to the portfolio, and this amount is more than sufficient to last him his lifetime.  

So will I do the same thing?  I am not in the situation to comment on that, because my portfolio is way too far away from this ideal situation, and moreover everyone's situation is different.  If I ever own a portfolio the size of his to be able to Fat FIRE, I think I may probably consider doing something similar, but there may be some factors I personally need to evaluate and assess.  Since my portfolio is significantly smaller, I did think of complete liquidation of all my assets before, but with the help of geo-arbitrage.  I am a Malaysian, with Singapore Permanent Residence (PR) status, so I did imagine liquidating all my assets in Singapore, renounce my PR status and withdraw all my Central Provident Fund (CPF) monies, and transfer everything to Malaysia with a exchange rate of SGD 1 : MYR 3.40 (a more conservative exchange rate for now).  After paying down all existing loans, I will have a net-worth of slightly above MYR 2M.  If I place all these monies in fixed deposits with premier banking rates, it may be able to generate an interest between 3-4% annually, equating to about MYR 70K per year, or MYR 5.8K per month.

The amount above seems decent and without any debt, it seems to be able to generate sufficient cashflow for me monthly to service my needs and wants.  However, this is definitely not Fat FIRE level, probably closer to somewhere between Lean FIRE and traditional FIRE, thus there are a few uncontrollable factors that may overthrow my retirement plans if I do something similar at this point of time.  

Firstly, inflation.  Magnitude wise, 5.8K seems to be a very decent amount, only in SGD perspective.  However, from the MYR perspective, with a simple hawker noodle meal costing around MYR 10 or more nowadays, 5.8K is not that big of a deal.  In addition, fixed deposit rates generally can hardly counter inflation.  Therefore although this amount may seem sufficient now if I do not splurge, the true story may be hard to picture 10 years down the road.  I definitely do not want to be in a situation where I run out of money when I am 70 years old.

This is exacerbated by the second factor, which is the depreciating Malaysia Ringgit.  I do not have any crystal ball to view the performance of the Ringgit in the next 30 years, but if history tells us anything, it is better to be prepared for the worst.  Depreciating Ringgit reduces the buying power of the people significantly through the years, and personally, if the depreciating trend continues, the erosion of the purchasing power of the net-worth will render it insufficient to tide through my retirement years.  

Thirdly, if I liquidate every amount in this manner, I am losing a very important safety net in my retirement years, which is the annuity in the form of CPF.  This will mean that I will no longer have access to the risk-free SGD 500 to SGD 1K that I may receive after 65 years old from CPF Life, which equates to MYR 1.7K to MYR 3.4K, and my entire portfolio will only be able to grow according to the fixed deposit rates set by the banks.  This probably is insufficient to protect my retirement years from longevity risk.

Lastly, renouncing my PR status is an irreversible process.  This move, in my opinion, will expose me to more cons than pros, as it will mean that I will no longer be able to work in Singapore without any work permit, and even if I can continue as a sole-proprietor, it may expose me to many other forms of taxation which is definitely troubling.  This is a bane for my Barista FIRE journey.  On the other hand, I may continue my Barista FIRE journey in Malaysia, but I believe I may face some difficulties and possibly some discrimination, as I am a Malaysia who does not know how to speak/ understand Malay, as I started studying in Singapore since Primary 1, and on a personal level, I am too lazy to learn it myself (yes, that is my fault).  So probably working in Malaysia may be something that will not materialize, and I am kind of dependent on Singapore on that.

As such, with all these factors in place, I believe I will not be able to just simply liquidate everything and leave Singapore to go to Malaysia, at least for now.  My net worth is just not big enough for me to do that (or simply said, I am not at Fat FIRE status as mentioned earlier).  So I suppose I will just continue working in Singapore now, but probably at a slightly slower pace gradually a couple of years down the road, and continue to grow my portfolio.  I will choose to retain my PR status, keep my investments in Singapore and generate passive income in SGD, which can be easily converted to MYR with favourable exchange rate when I needed it.  

For perspective, Mr Money TV (a Malaysia Financial YouTuber/ Fin-fluencer) recently shared a case study "How to Retire with RM750K".

"Recently, a retiree shared how he depleted his RM750,000 EPF funds within just 7 years. Here's a breakdown of his expenses:

  1. A significant portion, approximately RM200,000, went into renovating his house. He invested in a concrete fence, a new kitchen, and a garage to create a cozy space for his children when they visit during the holidays.

  2. Following that, he spent another RM70,000 on his daughters' weddings,

  3. Remaining RM480,000 for daily expenses such as food, utilities, and car fuel. The high cost of living took a toll, draining his funds faster than anticipated.

Luckily, his 62-year-old wife, a retired government employee, receives a pension that supports their expenses in their golden years."

That is definitely a very scary outcome that I definitely would not like to get into, and will not allow myself to get into because I do not have a wife that receives pension from government.  Furthermore, this month I have a taste of the need for emergency cash as my router is too old and it needs replacement, and suddenly, my ceiling showed signs of water stains, which indicates leakage from the unit above.  All these involves repair and replacement cost which burns through my emergency fund this month.  Will need to replenish it in upcoming months.

So, back to the question, will I liquidate my entire portfolio after I attained Fat FIRE?  I think if I can grow my entire net worth to at least MYR 6M (or SGD 1.8M) without any debt, that is when I can safely say that I am at Fat FIRE status.  By then, I think I can choose to renounce my PR status, with the choice to liquidate everything and move all my assets to Malaysia and just keep everything in fixed deposits.  However, that is all a dream for now.  Just got to continue to work, and work towards my goal.  Barista FIRE, here I come...!

Comments

  1. Hi BF, how are you? Interesting blog post and thanks for sharing!
    Aiya, stay and retire in Singapore lah. Year end once US cut interest rates think REITs and equities will probably start to have a mini-rally into 2025. Putting too much money into extremely conservative FD and T-bills will lose to the inflation monster eventually. As long as remain adequately diversified like what you have been adjusting for the past few months think should be fine. :)

    The Malaysian retiree who depleted RM750K story is scary. The EPF scheme no annuity portion like CPF?

    ReplyDelete
    Replies
    1. Hi Blade Knight
      Thanks for dropping by, lol. I am fine I suppose. For the meantime, yup, I will definitely be staying here, but as my mum age, I will definitely need to go back one day, so early planning is necessary.
      Malaysia EPF is apparently not as strict as Singapore CPF, as EPF actually allows full withdrawal after a certain age... which is what Singapore CPF doesn't allow and instead pay us monthly instead. That is why I think CPF scheme is better as many individuals out there are actually not very wise with handling a huge sum of money, and early depletion is not uncommon.

      Delete
  2. Maybe you can consider to put in your money into EPF (risk free rate except if Malaysia go bankrupt) if you considering back to Malaysia. Average % will be 5-6% annually. Worst case will be 2%++ which is the minimum amount commited by EPF. You can allow to withdraw any amount if the balances exceeded 1 million.

    But downside is you only allow to deposit 100k annually to EPF.

    ReplyDelete
    Replies
    1. Hi Anonymous
      Thank you very much for the insight to EPF. Personally I didn't really research or think much into that because I dread dealing with Malaysia's government offices and officers, as I don't understand Malay. Renewing my passport, paying for home related fees and taxes, renewing my driving license are the bare minimum I would do, I do not wish to commit another item with them. Do not want to have the feeling of being discriminated against, lol.
      Nonetheless thanks for the suggestion! Will probably dig into the details of EPF further. Cheers!

      Delete

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