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Early Retirement Planning: Is Emigrating Possible with just $500,000?

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At the end of the ninth intake of the Early Retirement Masterclass that was just concluded over the weekend, students were given a chance to think about a country they would like to emigrate to.

The class was divided into 4 groups and each group had to select a target country that they would love to emigrate to.

Students imagined themselves as singles, armed with $500,000, who are tired of living in Singapore and long for a better life in another country.

To keep the exercise short and simple, students were told to ignore the complicated realities of immigration like getting a work permit and dealing with housing issues. In actual immigration, the costs of these will not be cheap and visa will also be an issue. Do take it into account.

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  • Qualifications include a Juris Doctor(Cum Laude)
  • Bachelor in Engineering from NUS (1st Class Honours)
  • Masters in Applied Finance also from NUS.
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My dividends surpassed my living expenses when I was 32. I retired when I was 39 on an average of $9-$11,000 worth of dividends each month.

The First Step

As a first step in emigration is that this hypothetical single will keep the bulk of their assets in Singapore and see if they can live on their dividends in their new country.

One objective of the exercise would be to see whether they could live like an expat in their country with their dividends.

If an unleveraged portfolio is insufficient for this purpose, they are allowed to leverage this portfolio to survive in this new country. In the event that a leveraged portfolio is insufficient to survive on in their target country, they can take up a job that provided a median income in their target country.

Previously, during the course, students were taught to build their own income portfolio consisting of REITs and business trusts. This eight-stock portfolio yielded 6.37%. Students were also taught to leverage this portfolio to the extent that their dividend yields could be increased to 9.24%.

Once they have settled down in their new country, the class would then be asked to investigate the characteristics of the exchanged traded fund of their host country and calculate the equity premium over the country’s 20-year government bond yield.

The class would also investigate the correlation of the host country’s market against that of the Singapore markets. Finally, the class will select one blue-chip stock that has a low P/E ratio and high dividend yield that would make a good starter investment for someone that is new to the country.

After about 30 minutes, the four teams were able to generate the following spreadsheet:

The class concluded that dividends from their income portfolio with a size of $500,000 will allow them to adequately live an expat lifestyle in New Zealand, Canada and Thailand.

As the cost of living in Australia is much higher, they would either need to leverage their portfolio or find a job in Australia to sustain themselves. It was not surprising that Thailand was the only country that they can live in if they’d limit their withdrawal to a safe rate of withdrawal of 4%.

The exercise generated a lot of excitement because the class was surprised at how cheap it was to live as an expat in Wellington New Zealand.

When a vote was finally conducted to make students choose where to emigrate to, both Thailand and New Zealand were found to have the largest number of votes from the class.

In summary, the exercise generated a lot of excitement as students found a way to consider what it is like to invest in a low-tax jurisdiction in Singapore and exercise some of their newfound powers of geo-arbitrage to live in a country known to have a culture where there are lower stressors and greater work-life balance.

Refinements will be made to this exercise and the next batch of students in December will go through a similar exercise with a different set of countries.

Editor’s Notes: Singapore enjoys a significant currency advantage versus most of its peers including Malaysia, Thailand, Phillipines, etc cetera. A singaporean dollar can buy a decent meal in Malaysia. 5 singaporean dollars can feed you for a whole day.

A Singaporean friend of mine who lives in Johor Bahru lives like a king off of his dividend portfolio while pursuing his dreams – shooting trap.

The drastic, perhaps ugly truth of the world we live in is that there are pockets of inefficiencies in our lives. We might love Singapore for its safety, its food(though im sure Malaysians disagree), its medical facilities, its top notch transport(again, some will disagree), but we also hate the constant rat race to the top.

For most of us, escaping the chains of corporate slavery or ascending the career ladder to a point where the money is better is a priority, and this exercise gives individuals a credible goal to work towards. Don’t forget that when you do actually emigrate, you get to do something crazily valuable – renting your house out in SGD and spending it in Baht or Ringgit.

That friend of mine stays in a beautiful 4 story glass bungalow that costed less than $300,000SGD. What can you can do with the rental flow of a 5 room in Malaysia or even Thailand? The sky’s the limit.

For locals who wish to retire early while enjoying similar living luxuries without leaving the country, a $500,000 capital sum leveraged at an equity multiplier of 2 allows you to generate nearly $95,000 in yearly dividends, or about $7,916 per month.

If that’s not enough for you to retire on, perhaps you ought to consider spending less money or simply turning that Ringgit and going wild – or simpy push all the dividends you get into more dividend stocks and let it compound more. The choice is yours.

If you’d like to find out how we build, test, and devise portfolios for Early Retirement, you can register for a seat here. You can find out more about the Early Retirement Masterclass here.

6 thoughts on “Early Retirement Planning: Is Emigrating Possible with just $500,000?”

  1. Hi Chris
    Interesting exercise!

    May I ask how the teams derive the annual expenses for an expat in their target country?
    Also does this include housing ( rental most likely )? If not, then housing might become a big expense in Canada I would presume especially Toronto.
    Thanks !
    Elsie

    Reply
  2. The income & GST tax portion in New Zealand would kill. Sure the cost of housing and car are much cheaper in Australia and New Zealand.

    I know of someone who went to New Zealand and return after nine months. There again, a colleague went to New Zealand, raised his two children through varsities and today, a Grandfather after thirty over years.

    I, myself bought a Aussie house, 30years ago, with the intention to settle there. Till today, this house continues to maintain my retired lifestyle passive income. The migration idea was completely aborted-other compelling factors intervened.

    Reply
  3. Hi Chris,

    Just like to check. The correct dividend amount should be half instead of what is stated? You might want to correct that as it might be misleading?

    “$500,000 capital sum leveraged at an equity multiplier of 2 allows you to generate nearly $95,000 in yearly dividends, or about $7,916 per month.”

    Reply
    • Hi,

      $500,000 at an equity multiplier of 2 means $1m in the markets. At 9-10% yields, that’s $90k to $100k in yearly cashflows. You can take some off the table and call it between $90-95k range. that does put it at about $7916 per month. Hope this clarifies.

      Reply
  4. Hi Chris,

    Very interesting and tks.
    Can I clarify regarding having $500k cash to borrow another $500k to boost equity value to $1M?

    Assume the yield is 9% which means will have $90k annual dividend.

    How about the $500k loan which we borrow which I believe should have a interest rate maybe 3 to 4%? Let assume is 3.5%.

    So 3.5% for $500k borrow fund, need to pay $17,500.

    Then our net dividend will be $90k -$17,500 = $72,500 equal to $6041.

    Is my above assumption and computation correct?

    Another concern is to find a reits or stock that can give 9% yield, fundamentally the reits or stock may seem to hv some problem. Ie starhub.

    Tks a lot Chris for the clarification

    Reply
    • Hi Chris,

      From the table, at 2x leverage for $500k, cashflow is $46,200 per year (minus the interest on the $500k loan).
      My understanding is that 9% is on the $500k and not on $1m. Correct?

      Thanks for the clarification.

      Reply

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