Planning for a Sustainable Retirement (Part 2)

Continued from Part 1

My Retirement Views
Lorna's article and advice resonated with me because I have been thinking about retirement for many years, even though I still have a good 20 or more years in the work-force (going by how the retirement age seems to keep increasing!)

Think About Retirement Early
Start thinking about retirement early. Thinking of the huge sums needed to have a comfortable retirement has the positive effect of making me a lot more prudent in my spending. Everytime I see my paycheck, I will be thinking, $XX must be shifted to retirement funds. If you have too much money lying around, especially as incomes grow, the tendency is to spend more and reward yourself 'because you have arrived'.

I have arrived.

I think such behaviour is not be wise. Do not assume that the grass will always be green and the sun will always shine.  I find it useful to re-define what it means 'to have arrived'. This is important, because money is a means to an end, and not an end in itself.

To have arrived, to me, means to achieve financial independence, i.e. I can stop work and pursue my hobbies and passions, without the need to worry for income, because my finances are already well-taken care of.

Take More Risks When Younger
It is with retirement planning and funding for our kids' education in mind that we started investing in London some 5 years ago. I had previously blogged about this here, see this post.

Originally, we thought that we would just purchase 1 London property to fund our kids' education. Doing our sums, we realised that after we come up with the 30% downpayment, the property would be able to fend for itself. When our kids were ready to go to University, we could liquidate the property, and release approximately 300,000 GBP - this sum would be sufficient to fund most, if not all, the expenses for our kids' overseas education.

Invest Some More
Because the first investment worked out so well, and we could see the rental yields back then (2009/10/11) were so strong relative to capital costs (easily achieve net 5%, if not more), we pushed ourselves harder and plonked down more downpayments for further properties.

When I say pushed ourselves, we really did. Our incomes were growing and the temptation was to spend more. Instead, we spent the same (if not less) and channelled every spare dollar we had into these investments. By God's grace and providence, we are 'sitting pretty' today, because the UK London property market has shot up so much in the past 12 months.

Fast Forward To Retirement
Now that we have more properties on hand, it is useful to think about the plan for them. But before we dive into the details, I would like to build on Lorna's good advice by introducing another concept which I had read before, i.e to spilt the retirement years into 3 phases - Go-Go, Slow-Go and No-Go.

Please read on in Part 3.