Hi (name removed for privacy),
I think you are more precise in your estimate than other people, so let me improve my precision of the estimates I shared with you. I was formally trained as an engineer and mathematician, so I appreciate your precision.
— You mentioned a friend aspired to generate enough dividend income to replace salary. I estimated 4% dividend yield for her (or him). That’s too conservative.
I like U.S. stocks. Some reputable U.S. stocks pay higher dividends than 4%. A less pessimistic estimate is 5%. To support SGD 60k/Y family burn rate, SGD 1.2M needs to go into stocks. How many of us can afford to invest SGD 1.2M into stocks , stop working and live on the dividend income indefinitely? I still feel this plan is impractical.
In many stories, a dividend stock can grow in NAV. Your friend may buy at $100 and receive 4% yield, while the stock grows to $150, paying out $6 a year, i.e. 6% yield computed from initial investment. However, based on my observation, I believe such success stories are rare even in the U.S.
High growth and dividend yield seldom co-exist. Your friend must be lucky (or skilled) to hit such a hero stock.
U.S. dividends are taxable incomes, but I’m unfamiliar. I did receive tax return documents from my U.S. broker, showing the dividend incomes. Assuming 20% marginal tax rate, then the 5% dividend yield becomes effectively 4%.
— We discussed cash payout “yield” and You asked about mine in my portfolio. I bought (or in the process of receiving) rental properties, private equities (i.e. high yield debts), stocks, unit trusts … paying above 4%. ( I will exclude those investments paying out below 1%. ) So a more precise average payout is 6-7%. A more conservative estimate is 5-6%.
My “weighted average” calculation is dominated by realized rental income. Realized rental income is much lower than gross rental income, due to vacancy, commission, taxes, FX conversion, condo fees etc.
I think Singapore private residential properties are unlikely to generate 4% realized rental yield. However, Singapore property NAV often grows, so realized rental yield could grow beyond 4%. Not familiar. I don’t think the rental amount grows as fast as NAV.
I used 4% as a benchmark partly because CPF-SA/MA/RA pays 4%, also because the U.S. mainstream view on dividend uses 4% as a criteria for high-dividend.
— I estimated my developer career to end in my 70’s. It might end in my late 60’s, depending on demand and my health.
Some WallSt developer colleague (Shanghai guy in his 50’s or 60’s) told me “If you enjoy coding, then you can work remotely, so colleagues don’t care about your age.” This theory will extend my developer career by a few years, but I don’t look forward to telecommuting.
— My target life span is 95 years. I will not give a more prudent estimate. (Prudent means planning for longer lifespan like 99.) Instead of “more prudent”, here is a more substantiated estimate:
https://www.singstat.gov.sg/find-data/search-by-theme/population/death-and-life-expectancy/visualising-data/lifeexpectancy shows that for a male Singaporean of my age, there’s a 11% projected likelihood to live till 95. If I am among the 11% most long-living males in my age group, then I would hit my target.
Q: how many percent of Singapore guys in my age group can work till their 70’s in a white-collar knowlege intensive job?
A: I think it’s below 11%, perhaps mostly in legal, architecture, healthcare(钟南山, same age as my dad), academic/education (like my father and many of his classmates)…
Therefore, my dev-till-70 career longevity goal is harder than my live-till-95 longevity goal. My father said both targets are realistic, if I work towards them. I believe my father and I believe in myself.
https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/cpf-life sayd 1/3 of Singaporeans would live beyond 90. I think this 33% is a conditional probability given that “you are a Singaporean aged 65 now, regardless of health or age”