[Remix] Should You Retire (Early)?

Last August, I published a post on The Smart Investor detailing the monetary and non-monetary considerations one should make before taking the leap.

I still stand by every word, but I’ve decided to extend it here with the nuances and personal anecdotes that usually stay tucked away in my internal monologue.

The Financial Core: Two Models (and Their Flaws)

Retirement math is about shifting from accumulation to sustainability. However, every model has a “blind spot” that requires more than just a surface-level understanding.

1. The Rule of 25 (The 4% Rule)

The idea is simple: accumulate a nest egg 25 times your annual expenses and withdraw 4% yearly. Historically, this offers a high probability of your money lasting 30 years.

The Problem? There are assumptions baked into this model that rarely survive contact with reality:

• Geographic & Asset Bias: It’s based on US historical data and a 50/50 stock-bond split—hardly a mirror for a Singapore-based portfolio.
  
• Static Spending: It assumes your expenses are a flat line, adjusted only for inflation. In reality, life is “lumpy” (think medical bills or home repairs).
  
• Market Blindness: You withdraw the same inflation adjusted amount regardless of market’s performance. Easy during a bull market, but emotionally difficult during a market downturn.

How likely are you to fit perfectly into these assumptions?

Not very.

Blindly following the 4% rule leads to either an underestimation of your needs or an overestimation that costs you years of unnecessary work.

2. The Dividend Income Strategy

This is an arguably more intuitive idea: building a portfolio of Singapore REITs and blue-chip stocks. Once the annual dividends exceed your expenses, you have a “salary” for life.

The Downsides:

• Dividends are never guaranteed: Companies can cut payouts (as we saw during the pandemic), and S-REITs are sensitive to interest rate cycles. A sudden cut can leave you short.
  
• The Inflation Trap: Even if payouts remain steady, inflation erodes your purchasing power. What covers your bills today may not cover them in 2036.
  
• The “Heavy” Principal: To buffer for these risks, you might need a dividend income of 1.5x your spending. This often requires a much larger starting principal than the 4% rule.

A Compass, Not a GPS

Both approaches provide a good initial estimate, but neither accounts for the turbulence of real life.

There isn’t a “fixed” way to decide if you have enough, and many (myself included) choose to combine these strategies.

However, even the most robust math doesn’t take away the biggest hurdle: Uncertainty.

In fact, without a shift in mindset, even a 3% withdrawal rate or a dividend income 2x your spending will still leave you feeling insecure.

Shifting Mindset: The Next Act

Instead of asking “Can I afford to retire (early or not)?”, the better question is: “What do I plan to do next?”

This requires a much deeper reflection than a spreadsheet can provide.

What is your next purposeful pursuit?

To be clear, “purpose” doesn’t have to be a grand mission. It just has to be meaningful to you.

In fact, if you find deep satisfaction in your current career, retiring doesn’t make sense.

Financial independence isn’t an escape; it’s optionality. It gives you the pass to pursue a new purpose when the moment arrives.

For me, that clarity allowed me to make unconventional choices.

Throughout my career, even before I left service, I declined promotion on two occasions to chase a different kind of purpose:

• The Pioneer Spirit: The allure of starting a new school from scratch was far more exciting than a pay raise.
  
• The Family Anchor: When family circumstances shifted, spending time with them took priority. Not only did I give up another advancement, I relinquished my management role.

Neither decision was straightforward. But knowing what I valued made the choice easier.

I get it—most times, the clarity isn’t there. That’s why this is far more difficult than crunching numbers.

When I finally took the leap three years ago, my vision was also shrouded in mist. I decided to “跟着感觉走” — to follow where my heart leads. (Guess what? That phrase is still my WhatsApp status today!)

I told my colleagues then, “Sometimes, we need to deliberately close a door before another one will open.”

Ultimately, your ability to adapt to change, whether in your money or your lifestyle, will define if you should retire (early) or not.

After all, retirement isn’t the end game—it’s just the moment you decide to explore the next act.

Related Post

Should You Retire Early? (The Original Post)

The Forties Crossroads: I Chose the “Slower” Path, Should You?

Thriving in My Fifties: Financial & Life Plan for the Next Decade