Last Updated on August 31, 2025 by Michelle
This blog is for anyone who’s thinking of retirement planning AHEAD of retirement, ideally in the 30s. Earlier you start thinking of the simple formula, more prepared you would be.
Simply put, there are just 3 things for you to do. 1. Reduce expenses 2. Increase income from investments 3. Earn income from doing what you love after retirement.
1. Calculate post retirement monthly expenses. Start reducing current monthly expenses.
Calculate your current monthly expenses. Largely, these will come in buckets of income taxes, insurance expenses, household expenses, dining, children’s education, transport expenses, shopping, travel expenses etc. You would need to calculate for at least a year in order to get a good monthly estimate, as there are yearly expenses (e.g. house insurance, car insurance, road taxes).
In order to project your monthly expenses post retirement, you should follow the below formula.
[Current monthly expenses – Income Taxes – Children’s expenses (education + others) – Home Loans ] * 1.5
This assumes your children are independent and that you have paid off your home loans. If you haven’t, you should prioritise paying off the home loans first or downgrade so that you don’t have a home loan. The reason why there’s a 1.5x multiplier is due to assumption that when you stop going to work, you will have more free time and money is generally needed to fill up your free time.
2. Calculate monthly cashflow from projected investments. Start increasing the number.
Not all investments produce cashflow like dividends, coupons or interest. Hence, as you go closer to retirement, you would need to increase your investments in bonds which generate fixed income and less of equity which would not guarantee dividends. Hence the general formula of 110 – your age = % of investments in equity, as per my blog on 7 Fundamentals To Financial Independence.
See if cashflow from investments will cover expenses.
If it does cover, really well done. You are financially free!
If it doesn’t cover, think of how to cover the gap. You can either reduce the expenses or increase the cashflow from investments.
Start now, so that you don’t get used to the higher lifestyle, goal is to not feel the impact of lifestyle downgrade after stopping earnings.
3. If not, increase the income by working on what you love
If the cashflow from investments does not cover your expense, the gap needs to be covered from further income from work.
Start looking into what you want to do for work that you love. It is actually healthier to continue working to keep your activity and social interactions level up. The difference in work at this stage is that you have the luxury of working on something that you truly love as opposed to work which you needed to do to earn the full income when younger.
To identify what you love, I suggest you read my blog on How To Know What To Blog About. And if you want to know why you should, I suggest you read my blog on 3 Reasons On Why It Is Important To Work On What You Love.
I have made a free downloadable checklist of things to do before you quit your job here.
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