Earlier this week, Mr Budget was relooking into his long term financial goals again. While we had previously set a goal to have S$10,000 monthly passive income by 2033 (45 years old), we will need to relook at the figure again since we have shifted our strategy from dividend investing to growth investing.

Previously, assuming a 5% annual dividend, the required portfolio amount for us to reach S$10,000 monthly passive income was S$2,400,000 by 45 years old.

Since we are no longer focusing on dividend play, we asked ourselves, what would our goal be since we are repositioned into a growth portfolio.

What if we aim for a liquid portfolio of S$5,000,000 by 45? What would it take? What is the rate or return required?

With Mr Budget’s current S$400,000 of liquid net worth (cash, stocks, bonds, roboadvisor) as of December 2020, here’s the backward calculation:

	Age	ROR: 21.5%
December 2020	32	$400,000.00
December 2021	33	$486,000.00
December 2022	34	$590,490.00
December 2023	35	$717,445.35
December 2024	36	$871,696.10
December 2025	37	$1,059,110.76
December 2026	38	$1,286,819.58
December 2029	39	$1,563,485.78
December 2027	40	$1,899,635.23
December 2028	41	$2,308,056.80
December 2029	42	$2,804,289.01
December 2030	43	$3,407,211.15
December 2031	44	$4,139,761.55
December 2032	45	$5,029,810.28

According to the table, we will need to consistently hit a ROR of 21.5% annually so that we can hit the required S$5,000,000 by 2032, starting from a liquid net worth of S$400,000.

For some context, 21.5% annual return is a bit hard to achieve – S&P500 historically returns 10% over the past 100 years, and legendary Warren Buffett’s average annual return is at 17.1%. So 21.5% is a bit unrealistic.

But the good news is, this calculation is assuming that there are no capital injection. If we were to invest S$60,000 annually, we will now need a ROR of 15.5% every year to hit S$5,000,000 by 2032:

Year	Age	ROR: 15.5%	+$60,000	Year end amount
December 2020	32	$290,000.00	$350,000.00	$404,250.00
December 2021	33	$404,250.00	$464,250.00	$536,208.75
December 2022	34	$536,208.75	$596,208.75	$688,621.11
December 2023	35	$688,621.11	$748,621.11	$864,657.38
December 2024	36	$864,657.38	$924,657.38	$1,067,979.27
December 2025	37	$1,067,979.27	$1,127,979.27	$1,302,816.06
December 2026	38	$1,302,816.06	$1,362,816.06	$1,574,052.55
December 2029	39	$1,574,052.55	$1,634,052.55	$1,887,330.69
December 2027	40	$1,887,330.69	$1,947,330.69	$2,249,166.95
December 2028	41	$2,249,166.95	$2,309,166.95	$2,667,087.83
December 2029	42	$2,667,087.83	$2,727,087.83	$3,149,786.44
December 2030	43	$3,149,786.44	$3,209,786.44	$3,707,303.34
December 2031	44	$3,707,303.34	$3,767,303.34	$4,351,235.36
December 2032	45	$4,351,235.36	$4,411,235.36	$5,094,976.84

Of course, if the first few years my liquid asset can grow at a higher rate, then it will be faster for us to hit the S$5,000,000 mark earlier.

And if we do invest minimally S$60,000 a year and consistently hit more than 15.5%, I think it is very doable to hit S$5,000,000 by 45, excluding CPF.

So by end of this year, hopefully we will have at least $536,208.75 in liquid net worth so that we will be on track. Will we hit this? Only time will tell!

For Mrs Budget, if Mrs Budget were to follow the similar rate of return as Mr Budget, and invest at least S$20,000 annually, Mrs Budget will be able to hit S$2,000,000 in liquid net worth by 40 years old, and she can then retire earlier.

	Age	ROR: 15.5%	+$20,000	Year end amount:
December 2020	29	$230,000.00	$250,000.00	$288,750.00
December 2021	30	$288,750.00	$308,750.00	$356,606.25
December 2022	31	$356,606.25	$376,606.25	$434,980.22
December 2023	32	$434,980.22	$454,980.22	$525,502.15
December 2024	33	$525,502.15	$545,502.15	$630,054.99
December 2025	34	$630,054.99	$650,054.99	$750,813.51
December 2026	35	$750,813.51	$770,813.51	$890,289.60
December 2029	36	$890,289.60	$910,289.60	$1,051,384.49
December 2027	37	$1,051,384.49	$1,071,384.49	$1,237,449.09
December 2028	38	$1,237,449.09	$1,257,449.09	$1,452,353.70
December 2029	39	$1,452,353.70	$1,472,353.70	$1,700,568.52
December 2030	40	$1,700,568.52	$1,720,568.52	$1,987,256.64

With an annual rate of return of 15.5%, Mrs Budget will hit S$2,000,000 by year 2030 when she is 40 years old, while Mr Budget will have to wait 2 more years to hit his S$5,000,000 target by year 2032.

Now that we know the math, it becomes very clear what we need to do:

• Get at least 15.5% rate of return annually.
• Invest at least S$60,000 and S$20,000 annually for Mr and Mrs Budget respectively.
• Earlier outperformance will greatly increase the end result.

I think S$5,000,000 (Mr Budget) can be quite a comfortable amount to retire with. We will also have our CPF to fall back to.

However, this is also not taking into consideration the amount that Mrs Budget and I will need to fork out for our kids, and that will be a big unknown for us now. And that may largely impact our financial projection.

S$5,000,000 seems to be a high target to aim, and we have to be really lucky again and again for us to get an annual return of 15.5%. The stock market needs to enjoy an extended 10 year bull run, and we have to be at the right side of the run.

The key is, since our goal is 10 years looking forward, similarly we should try as much as possible to visualize the world 10 years later, and the kind of disruption, technology, environment and new life order we will be living in.

Once we can visualize that, we should then deploy and allocate our resources accordingly to capture some of these future growth.

It is also always good to aim high and aim for the stars. Even if you don’t hit the stars, you will land at the moon.

Will review this at the end of the year. 🙂

Also Read: Our Financial Goals