How much to retire?

[tintin]

Sanurian,

Your updated "practical" information regarding the retirement visa is certainly more accurate than the brief comment I posted. My limited experience had to do with when this visa was in the Government's planning stages (actually, it is the info that is presented on the link Freogirl is suggesting to consult), and I was considering it for myself.

But you are "living it," so to speak, and I would consider that your practical experience somewhat takes precedent over the official rules and regulations. However, these rules are still on the books, so I believe that your experience is an unofficial interpretation of these rules by some immigration officers. By this, I mean, be careful.

As for my "preventive maintenance" comment, I stand by it, and it does not only applies to vehicles. From my personal and professional experience in Bali, keeping anything more or less mechanical functioning properly has always been continuous struggle. This being said, I am always amazed at the ingenuity and resourcefulness of the average Indonesian, which I have experienced not only in Bali, but all over Indonesia.

 

[Sanurian]

Yes tintin

...so I believe that your experience is an unofficial interpretation of these rules by some immigration officers. By this, I mean, be careful...

I do take your point. However, my retirement visa was organised by an official in the Immigration office in Denpasar. Two years down the line, no problems. (Didn't use an "agent"...the funny thing is that the Immigration Officer used one, probably to cover tracks in case there's a problem further on.)

Interpretations of "the rules" depend, most of the time, on which immigration office one is dealing with...it does vary quite a lot.
So - whom should we believe/trust? And where is the definitive information from the government? Mungkin besok, as they say. Which can mean anything from tomorrow to next year, or even later.

I just want to live here without breaking any rules and not having to pay extortionate amounts to the corrupt who more or less surround us.
A bit is "OK"...this is Indonesia, after all, and I'm standing in it.

 

[Roy]

I agree that Phil’s post is right on the mark. The only thing I could add is to consider where to “park” your $100,000 nest egg. If parked in the US, I agree that even an aggressive annuity fund isn’t likely to produce much more than around $6,000 of yearly income.

However, there are relatively safe Asian markets where that amount could generate an income of $8,000 or more easily and with “reasonable” risk. I also advocate “spreading one’s risk...i.e splitting the nest egg up into say three equal parts putting say 1/3 in aggressive (but higher risk) funds, the middle part in more conservative funds, and the final third in no risk guaranteed interest accounts.

The key here is to find the balance that is right for you that will generate the highest amount of yearly income which you would live off of. An income of $5,000 on an investment of $100,000 is a “no brainer” and I can’t see any problems with you earning at least $8,000 a year on that investment. Hey! Then you could afford to take up smoking AND drinking!

 

[iainsomers]

Apart from my idea that 100k dollars is ways too little to retire, i would like to remark that you have to deduct the inflation from your intrest.

So if you think you can live from 6k/yr now and you have 100k. You need to make 6%+inflation to retire. And long-term inflation in indonesia is not 2% :cry: .

 

[Jimbo]

All good pieces of advice even if they vary a bit. In my enquiries which started when I first joined the forum I have never found any changes to the law as stated in Freogirls link.

As Phil has stated the laws may be interpreted in different ways which may allow one to live more cheaply but as he also states that interpretation may well change so in my view it is better to be prepared for the worst and spoil any chance of disapointment.

I remember Roy and I had a conversation a while back on these issues and decided at that time that if you had the house covered arounf $15, 000 US a year would be right to live modestly. It is however all subjective. My brother in laws income from growing rice and coffee is about $4,000 per annum but even though he lives in a simple house, grows most of what he eats there are certain fundemental expenses and he is always short of money.

It is a difficult subject to close so I would say this....How many expats in Bali or Indonesia for that matter live on this kind of income? I would hazard a guess....None.

 

[Roy]

Iain writes,

“Apart from my idea that 100k dollars is ways too little to retire, i would like to remark that you have to deduct the inflation from your intrest.”

While that is somewhat accurate, most investment yields increase as inflation indexes increase. There are certain types of investments that are inflation sensitive so that the annual yield may increase as inflation increases. This is particularly true of insurance company annuities. Even the US Social Security program adjusts ongoing benefit payouts based on inflation indexes.

In other words, what is paid out this year based on the principle investment....say 6% would be adjusted upwards in the second year with the objective of offsetting any inflation index increase.

Jimbo writes,

“How many expats in Bali or Indonesia for that matter live on this kind of income? I would hazard a guess....None.”

Actually, I know one fellow here who lives on the interest from a trust fund, which is in the ball park of slightly less than $6,000 a year. He shares a modest house with another fellow, and that alone can cut down quite a bit in annual housing costs. I think the real point here is how motivated is this person who wants to live here? I think that if the answer is, highly motivated, it can certainly be done.

 

[iainsomers]

If you have 100k dollars and you want no risk, there is no-one in the world who guarantees 6% plus inflation. Only with more risk or in another currency this is possible.

 

[Roy]

"If you have 100k dollars and you want no risk, there is no-one in the world who guarantees 6% plus inflation. Only with more risk or in another currency this is possible."

I couldn’t agree more...nothing ventured, nothing gained, which kind of begs the question, how does one amass $100,000 in the first place without some amount of risk?

Any retirement specialist or financial planner/advisor worth their salt would never recommend placing all of one’s retirement funds in a simple FDIC interest bearing bank account.

For example if you are single, not planning on getting married, and want the largest possible amount of monthly income from an annuity, one should consider an annuity product that terminates at death...i.e. no financial value to your annuity after your death. That is a pension and life insurance product tied into one investment, but in this case the insurance angle is to bet on you dying sooner than later. The annual yields are excellent, but to get firm quotes, you need to do your homework on the internet. By the way, these ARE GUARANTEED payout products and they can be designed to consider inflation factors.

Just for grins, here are the top performing mutual funds over the last year that invest only in US Stocks. The percentage is their last year’s return:

ProFunds Real Estate UltraSector Inv 51.48%

ProFunds Telecom UltraSector Inv 50.94%

ProFunds Real Estate UltraSector Svc 49.96%

ProFunds Telecom UltraSector Svc 49.55%

E.I.I. International Property Instl 47.51%

Morgan Stanley Inst Intl Real Estate A 45.47%

Morgan Stanley Inst Intl Real Estate B 45.11%

Morgan Stanley Inst US Real Estate A 42.07%

Morgan Stanley Real Estate D 41.95%

ING Van Kampen Real Estate I 41.88%


Even the top ten small growth, most conservative mutual funds were yielding an annual investment return of 16 to 17.79%

 

[iainsomers]

I think we are drifting away from the subject towards my profession and (i believe) your former profession.

Of course there are a lot of ways to get better results (although 2006 was a mighty fine year for stocks).

I just wanted to explain that a person who has no good knowledge about Bali and no good knowledge about investing is taking some risk in moving to Bali with just 100k. I think that is not enough, but it depends completely on your lifestyle, familysituation, age, risk-appetite in your personal life.

I'm probably on the other side of the spectrum than topic-starter, but i would need much, much and much more.

 

[Roy]

Good reply Iain. Maybe you should PM the OP (topic starter) and offer your investment advice....seriously.

I agree 100% that the OP could use some very sound financial advice, if only to increase his annual yield during his years on Bali.

I also understand what you mean about the "spectrum."

However, I don't think we are drifting away from the initial topic, as inherent within the topic is in reality, the financials.

So, any tips as the trading day in New York is about to begin? Cheers, and good trading.

 

[Bert Vierstra]

Ah how much to retire....

How much for a car?


How do you want to retire?

You can find a reasonable place to sleep for $50 a month, you can rent a house for $5000 a year, now what ?

 

[Roy]

Now what?

Now Gongchime plops down his 100K with Iain, who can surely earn him 10% a year, then, he (or she) takes the 10 grand earnings, rents an OK house for 3 grand a year, buys an old, reliable and will run forever Kijang for another 3 grand, and lives off of 4 grand (other expenses) for the rest of year one.

In year two, Gongchime has an extra 3 grand (the Kijang is paid for), for a total of 7 grand to live on...meaning quality of life has just increased by 75%...ergo smoking and drinking in modest amounts are affordable as are “other sins”....if so inclined.

I’m just having fun, but the scenarios are endless....although for certain, they can just as well end in disaster.

On a serious note, even the most well healed person has no guarantees, whatsoever, that life in Bali will fulfill their dreams, or even meet their expectations. All of us that call Bali home have taken risks to one degree or another. There are bountiful reasons why Bali may not work out for one person or another, and those reasons, as often as not, have nothing to do with money.

Moving to Bali with a 100K “in the pocket” at only age 50 is a great head start. When I moved here at age 48, I had far, far less in my pocket. The funny thing is, I know several other expats who came here with less, and they “made it happen” too.

To Gongchime, I would only say, if it is what you want, then go for it. Life is not worth living on the sidelines.

 

[iainsomers]

I plan to move when i'm 31. And I understand that this is a great blessing if I can really make that happen.

To clarify my job. I'm more of a hedge-fund-manager/arb-trader for my own account. Not an investment adviser. Ofcourse this involves alot of knowledge about investing. Together with my knowledge about african cichlids these are the only subject that i know alot about. I'm a pure specialist. In Bali I will develop an new specialism.

For somebody with a real bali-dream i'm willing to give advice on the income side of the finacial part. On the other sides of living in Bali I also can give advice....... in about 20 years.

So topicstarter can PM me.

Roy, what was you precise job in your former life?

 

[macupblue]

i am not sure,but i think he has to go 2 times in the year for a visarun.I have nor idea about the money he need only for that? maybe 1000 US$ ?

 

[Roy]

"I plan to move when i'm 31."

Now THAT is what I call early retirement! No, I understand you will be finding your own niche here.

In my "past life" I was an employee benefit specialist for some large corporations in the US representing the Prudential...the "rock guys", not the English Prudential. :wink:

Iain, how long before you reach your "target" age 31? I’ve always enjoyed your post closings... “Only in asia I find my peace.” Amen to that!

Macupblue, good point about the visa runs as an added yearly expense. Bi annual runs to Singapore can be done for a little less than 1K US but that is certainly an expense to factor in one's annual budget.

 

[iainsomers]

I'm 28 now. We plan to move to bali in 2010. I'll probably be 32 (born in april) before we arrive. There are, as I see it now, only a couple of non-monetary reasons why we maybe will postpone our move with a year or so. These reasons are good ones, I maybe tell later.

But we are sure we are gonna move in the coming years. I'm longing for a change from the financial super-specialist i'm now into something else. Even more than Santi longs for going home.

Major points wich I consider difficult but will overcome:

1. Not working my ass of every day
2. Learning bahassa (being a super-specialist, made me not good at everything else, especially languages)

But my major points are very very minor points to others. Once again I do understand that I'm blessed with this situation.

One thing I do understand is, and I think some people dont understand that, is that Bali is not paradise and also not near paradise. But for me a lot of asian places are as close to paradise as can be. Bali is one of the places wich is also near-paradise for my wife. So together we will create our own paradise.

 

[Jimbo]

In retirement you can:

1. exist

2. Manage

3. Enjoy life

4. Work Oops that is not retirement.

10% income from investments. Bring it on but without risk of loosing all or most I do not think so. I have seen pensioners who do points 1 and 2 and they are not happy.

Many who came to bali without much money found a way to make it including Roy and did not retire which was the subject under discussion. At the end of the day the law tells you what is required. Ignore it if you wish but do not cry about it if they enforce it.

The definitive answer to the question is:

$18,000 per anum
Tax on this at current rates
Medical insurance
house (bought or rent)
Maid/housekeeper

Total cost around $25, 000 per annum

Anything else is trying to get away with it. On the other hand you can do like many and break the sprit of the laws by misusing the existing visa system. You pays your dues if you get caught.

 

[Roy]

Jimbo, as I recall the original poster, gongchime was asking about retirement at age 50....which is too young for the retirement visa anyway. When you mention taxes, just what taxes are you referring to? Anyway, how did you arrive at your “definitive answer” and determine an annual budget of $25,000? That's over 19 million a month which would be quite a lavish monthly budget for Bali for a single person.

I think for some folks, maybe not you or me, they could find mere “existing” or “managing” in Bali to be more than satisfactory.

 

[iainsomers]

Is retirement stopping your current line of bussiness or stopping with doing everything wich is beneficial for either yourself or your surroundings?

In the first case: I'll retire as soon as possible.
In the second case: I'll never retire and advise everybody never to retire

25k sounds, but how can I say with no experience, reasonable to me.
After all, if you stop working in your profession (assuming that you make most money in your own profession), you wanna enjoy live even more that you do now.

Another problem with retiring is the currency-problem. In which currency do I keep my money? My advice would be a mix of 10% local (Rp, in this case), 70% currency of origin (provided that that is a stable currency) and the balance is another stable currency.

I know one guy, who used to live in Sulawesi. He sold his bussiness in Germany when he was 39. Lived till the asia-crisis a good life and is working now quite hard again in S'pore. He invested everything in some indonesian investments. The investments were not even that bad (-10% in rp). Only his rupiah more than halved.

 

[iainsomers]

Additional to the last story. He had a very egocentric wife, wich left him at the worst moment. He considers this a great blessing (now), as he has a truely wonderful wife now.