I met my university mate on the Tuesday after the Friday where I had an “urgent” money conversation with an ex-colleague. (You can read more about my conversations with my ex-colleague here: Your Financial Discomfort Will Eventually Boil Over)
Let’s call my university mate Alex.
We met at the Food Republic food court in Suntec City for lunch. Alex worked close by and he directed me to see what I would like to eat there. His “go-to” meal is this seemingly China Cai Png store.
I decided to order this Chicken Cutlet Fried Rice.
In a packed Suntec City Food Republic, the queue is very short, which usually make you suspect about the quality and quantity. I saw the guy cook the fried rice then wait to put the meat. He cut one stack of chicken and I thought that was decent.
Then he waited.
And cut another stack and put it in. Holy shit.
Then he give me a bowl of soup.
$7.30.
Not cheap but also not too expensive. It was satisfying enough
Alex would tell me his “go-to” Cai Png will come up to be $8-$10.
I can see that he did not order any rice with his food. I always know Alex is pretty into the low-carb kind of diet. We started to talk about food.
I never really understand his “why” until he unpack for me.
“My mom’s line of ancestry have a history of dementia and Alzheimer’s disease.”
Alex saw that a couple of his relatives end up in that way. After his dad passed away, his mom deteriorate in the same way. His brother and he decided to hire a maid for mom. Turned out the maid was very reliable. But it was during a period where the maid had to go back home and he stayed with the mom that drove his conviction in. He observed first hand how much his mom’s condition has deteriorated.
There is probably a part of him that wishes to rebel against fate, which drove him to do the research into whether there are ways to do that. While things like Alzheimer’s disease are part genetic, they sometimes say it is also Type-3 diabetes and there is link to sugar and carb consumption.
Alex found that controlling our sugar intake, taking care of getting enough sleep, being mentally active during our old age in a certain manner are viable steps we can take.
I would sometimes explain to others that we develop unique conviction (sometimes irrational) when we are “touched” by certain events compared to others.
When his wife and him had their son 10 years ago, both of them decide to do their will and LPA (Lasting Power of Attorney). He proceed to explain to me that the will, and the LPA clarifies the propagation, division of the money in both the state of [both parent’s death] and if he ends up in the same situation as mom despite trying to do his best.
“You realize that when we go for holidays, both my wife and I usually are together. That should make you think about whether it is a good idea to have both of these things.”
“I think you should consider doing your LPA if you have not done so.”
I thank Alex for pushing this to me. He is probably the second person, aside from my colleague Vincent who explain to me what I need.
I spend the next moments explaining to him that my KPI for the year was to refine how Providend’s client adviser engage their client on the topic of long term care. This refinement process involves thinking about how much is needed for long-term care needs, going bottoms up instead of just top down, the technical math of sizing how much to self-insure long term care needs, the how-tos and how it compares to insurance.
I could just go into that… but I choose to just share our experience with putting up my grandma in a nursing home. The environment and experience, the degree of subsidies and my philosophy towards these things after my research and personal experience.
Alex is more pensive when he reflects upon his career and financial situation.
He worries less about money and am thankful about what understanding that means.
“There was another retrenchment exercise at the bank. I decide to put my hand up if they need me to go. Given how long I been there, I would most likely get a decent number of month’s worth of severance sum and I can decide where I can go from there.”
“I think I have taken care and saved up for my retirement.”
“The only thing that I might need to save up more is if he (son) needs to go to an overseas university. So we might be looking at a sum of $400,000.”
As the conversation develops, Alex shared about retirement.
“If I look at what I need, I would probably need $1,000 monthly in my retirement. Not including her [wife]. If we include that, we are probably looking at double that.”
I told Alex straight up I was astonished he would actually tell me such a number.
Whenever a topic drifts to retirement planning, I expected all sorts of standard numbers. $4,000. $5,000. $7,000. $10,000 monthly. Due to the unique place that I work, I would regularly see income planning numbers of $15,000 to $30,000 monthly.
I was not horrified if Alex have considered too little. Have he consider this. And that. Possibly missing out on this. Had he consider all this, the capital that he needed would be much higher.
I was astonished because his mind rebelled against three pretty big things that prevented folks from seeing a more reasonable income needs number.
The first is most people are too anchored to their current lifestyle and the figured they guessed is closer to their current position in life. Most people are less introspective, reflective and cannot envision a more realistic lifestyle they desired that is different from their current life position.
To make it worse, you need to have the headspace to come up with a figure for each of those line item and the total amount.
Not many people does that. I think nowadays, I spend more of my time telling folks I cannot do this part for them and if you want a good income plan, you better be more introspective and figure this part out. I basically told my ex-colleague three days ago that this will be her major exercise if she wants to really know the mileage of her $550,000 in cash and $200,000 accessible CPF OA at 55.
The second thing is this is more remarkable given where Alex work, the people he interact with. I am sure this number is far, far, far lower than any of his colleagues, peers thinks they need.
I never went into any financial numbers check with Alex. Usually, I have my way of figuring out if a person’s financial situation leans towards very safe, safe, pretty ok but sometimes can fail, or needs further conversation, or basically not there yet (given not just their wishes, but what I think people normally needs {even though they might not see it at that point})
I just told him that experience tells me both his wife and him should have reached CPF Full Retirement Sum. This means each has a CPF LIFE Annuity Income, accessible at 65 years old, that has the purchasing power of S$1,400 monthly today. (If you have no idea how this math came about, I kind of write about this in this two articles: CPF’s New Personal Retirement Income Planner Tells Me I Secured a $1,430 to $1,770 Real Monthly Income and How to Inflation-Adjust Your CPF LIFE Basic or Standard Plans)
His introspective look at his future lifestyle basically tells him that he has covered his retirement lifestyle today, even without touch his cash savings. If we factor inflation, that CPF LIFE Standard income would be closer to $900-$1000 monthly today if we consider inflation. Alex’s situation is pretty safe not because of whether the income covers his spending exactly but that this CPF LIFE income looks like a safety net over the income he can withdraw from their cash assets.
I felt the last consideration is there are still things not saved up yet. The family still has a $900,000 mortgage not paid off and in his mind, they still have to save up $400,000 in children’s education.
These layers made it so only a very small number of people can come up with such a relatively low income needs figure.
I kind of think that the income needs figure that gives most people the kind of financial security and peace of mind they want is a much smaller figure than they realize. I also think an important part of financial advice that is of real value is to ask critical questions that tell us their true income needs, help them envision, force them to confront their real fears.
Some may have already saved up a capital conservatively that hit the true income figure that gives them security.
If security is more emotional and mental, the value of advice is both the technical and also in the way we can frame what truly gives them emotional financial security with the numbers & investments.
In a way, the earlier mental conflict with dealing with his dad’s passing, his mom’s situation, the experiences of living in family isolation during covid may have helped peel away with the things that is less important. The things that he can work a paid income for. Peeled away the good-to-haves.
What is left might be his actual ikigai-kan.
And that ikigai-kan just cost not so much.
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Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Insurance Start-up Havend. All opinions on Investment Moats are his own and does not represent the views of Providend.
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