Well how long is a piece of string? It all depends of course on your lifestyle and how much you will need to support that lifestyle.
But however much money you need, the basic principal behind retirement is the same: build up a large enough nest egg that is invested securely and provides a steady stream of income. Easier said than done of course – as anyone who has invested in stocks will tell you after their savings had been heavily depleted as a result of the financial markets’ meltdown.
And to live in Bali is not as cheap as many people make out. Sure a lot of things are cheaper here than in developed countries but there are plenty of expenses that can easily make the best planned retirement plans go awry.
So what is a reasonable sum that you could live on in Indonesia?
Well here are my estimates for living in Bali (per month for two people):
Rental of a small but nice house (no swimming pool): Rp3 million
Electricity: Rp500,000 (assumes 1 aircon)
Food: Rp5 million
Visa extensions: Rp1 million
Entertainment Rp1 million
Miscellaneous expenses: Rp1 million
Grand total: Rp12.1 million/month
or 12xRp12.1 million = Rp145.2 million for one year
So how much would you have to have invested in a retirement fund to generate a perpetual income stream of that amount? Well, that’s a difficult question to answer precisely, but to be fairly conservative I reckon you could count on a fairly secure US dollar high yielding investment fund to give you a return of 5 percent – perhaps 7 percent if you were pushing it.
That translates into an investment fund of between Rp2.1 billion (US$210,000) and Rp2.9 billion (US$290,000).
A pretty sizable amount of money by any standards – and that’s just living simply.
Maybe Bali isn’t so cheap after all…
>>> Retirement in Bali - the practicalities