Early Retirement With U$1,000,000?

It might be best for you to talk with some fee based financial advisers at home.   You could simply invest the US $1,000,000 at a reasonable safe return of around 5%, which would  give you $50,000 per year to live on.  Simply rent here in the Philippines and keep the principle intact in the US.    If things do not work out in the Philippines, you still have your $1,000,000 !   
You will live very well here if you avoid the scams and keep a lock on your wallet     

Speak to an American Financial advisor. If you are looking to retire in the Philippines and are not looking for an extravagant lifestyle, One million should be enough if properly invested.
If you are looking to live near the Subic Bay area, some fellow expats and I are developing a plot of land right next to the Highway and looking for a few more expats to join us.

It's more than enough. I agree with Bob's recommendation 100%  and am following similar strategy. I like keeping my assets in the US although you will of course have to pay income tax regardless. You can live very well here on the investment income.. I still hold rental property due to the tax benefits, but it does require a property manager when you're halfway around the world.

I would be cautious investing here and I still rent after several years as it is cheap and allows flexibility. I would also recommend not selling your home there until you have spent a couple of years here. You could rent it as a way of maintaining a diversified portfolio. Lots of guys make it a few years here but eventually the reality of living in a developing country wears one down, and some leave.

Bob604 wrote:

It might be best for you to talk with some fee based financial advisers at home.   You could simply invest the US $1,000,000 at a reasonable safe return of around 5%, which would  give you $50,000 per year to live on.  Simply rent here in the Philippines and keep the principle intact in the US.    If things do not work out in the Philippines, you still have your $1,000,000 !   
You will live very well here if you avoid the scams and keep a lock on your wallet     

Yes

If it''s a quiet, hassle free life you're after, that pretty much works and you have the security of knowing your cash is safe as houses.

However, buying houses in foreign lands commonly isn't as safe as houses as buyers end up spending a lot of cash and tend to lose out on deals as those offering "Great investments" tend to be on the make and don't give a flying rat's arse about their victims.

I'm with Bob on this one - check out your options on high interest accounts and live a hassle free life.
There is a downside to this in that the lack of stress means you're likely to live longer so have to plan for a few years longer than you would if you 'invest' in property.

Some will disagree, but they tend be be the ones selling investments.

PhotoSmurf wrote:

Hi Folks,

If I sold my home, rental property, private business shares, and some collectibles, I would have about U$1,000,000 after fees and taxes.

Would this be enough to retire comfortably in the Philippines? Assuming 30 year retirement with no significant income (aside from any income generated from U$1,000,000) and living an upper-middle class lifestyle (say U$40,000 per year).

Should I seriously consider purchasing or investing in a local income-generating business?

Whimsical scenario asked purely out of curiosity. I've visited the Philippines twice and love the Filipino culture, food, and people!

Nice scenario but as others mentioned don't forget taxation and never forget inflation,,,,, that's not tax deductible against your returns. You need to crunch the numbers, seriously. If you want to keep your capital say 1 million bucks then you need to inject your countries CPI/inflation rate back into the principal, say 20 to 25K given the US inflation rate, not sure of your tax regime but in reality you only have 20 to 25K to live on based on a 5% gross return.
If you don't mind blowing your money over 20 or 30 years then yes you will live very well.

OMO.

Cheers, Steve.

You have what is thought of as a high class problem to which there are many and varied solutions.  My other reaction was that $40,000 seems like a really high lifestyle in the Phils. If you went lower class to $30,000, you would still live king-like and have much more money for problems which will arise and for replacing capital with investment earnings.

Jim

A hearty "thank you" for your detailed and thoughtful feedback!

Ironically enough, I work at a major bank and my specialization is wealth management for very high net worth individuals and estates. I have multiple financial and investment designations including Certified Financial Planner (CFP).

Some impressions from my thought experiment:
- keeping the U$1,000,000 principal in the U.S. and living off the generated income seems most reliable and prudent.
- taxation and inflation effects should be factored into any retirement calculations.
- I earn about 6.5% per year for my long-term clients so I used an after-tax rate of 4% in my calculations.  [ my performance numbers... worst loss of -17% in 2008, best gain of +22% in 2013, average return of 6.5% over 16 years ]
- U.S. interest rates are a paltry 1% so some combination of high yield U.S. bonds and dividend generating U.S. stocks might be recommended.
- buying and operating an income-generating property or business in the Philippines seems rather problematic.

Exactly. Or just throw it all into Vanguard, lol. Jim is correct that one can live like a king here on 30k. Problem arises if you try to maintain a home and car in the US as I do,  the expenses go up significantly - property and income taxes, home and vehicle insurance, maintenance and repairs, possibly health insurance.. which I have.  All of a sudden there's another $15-20k. In my case that has been eating away at my investment principle, despite my best attempts to mitigate it through other avenues such as home rental.

Ultimately I am discovering that I need to live one place or another, lol. Or go back to work.

pnwcyclist wrote:

Or go back to work.

Please note, swearing is not allowed on the open forums

More seriously, retirement, in my humble opinion, should be exactly that, and used as fully as possible to explore whatever takes your fancy to explore - but relax whilst doing it.
Messing around with investments, property, business, or whatever other stress creating activities is a mess waiting to happen and a guaranteed way of ruining your fun.
I'm exploring my options at the moment, and I've come down to sticking the lot into high interest (real banks, not dodgy fly by night jobs or internet get rich schemes) and live off what comes in.
My calculations are a bit rough at the moment as I have no idea how long it will be before I scrap the idea of doing paid work, but it looks a lot like I'll be somewhere in the upper middle class range, so good enough to live happily but no damned stress (Except for the wives nagging).

Haha, you're right,  but I kind of enjoy all the financial stuff I guess, especially compared to the drudgery of a 9-5  job. It's a challenge to figure out ways to make money. The most enjoyable venture I had was on a  5 year project developing some raw land I bought in northern California. It was a lot of hassle and risk but allowed for tremendous creativity.

pnwcyclist wrote:

Or go back to work.

That's like getting back together with your crazy ex years after the divorce. 

Bob604 wrote:

It might be best for you to talk with some fee based financial advisers at home.   You could simply invest the US $1,000,000 at a reasonable safe return of around 5%, which would  give you $50,000 per year to live on.  Simply rent here in the Philippines and keep the principle intact in the US.    If things do not work out in the Philippines, you still have your $1,000,000 !   
You will live very well here if you avoid the scams and keep a lock on your wallet     

Bob is spot on, the only other consideration inflation, as such a return of 5% is only a true return of 2% based on a 3% inflation here in the Philippines.  (Inflation is currently 5.7% this quarter and it is forecast to be just over 5% next year, hopefully after that it drops back to 3%)

Your budget of $40k USD PA is spot on for a bottom end of the upper middle class lifestyle,  (I know many Filipino's who's children spend more than that in a year)

With the $40,000 PA you will be OK but:
* without a car
* paying rent at around 30,000php per month
* And you not wanting to fly back to the US every year.

Let's look at the following figures to answer your questions:

Based on inflation in the Philippines of 3% PA  (it is currently at around 5.7%)  and you achieve an investment return, after fees and taxes of 4%, your money ($1,000,000 USD) would last for 30 years, no longer no less.    -   From there you need to put in what you think your return would be, it may be higher than 4% or less than 4%.

The big risks you face is possible inflation increase (in the Philippines) higher than 3% and exchange rate risk (if the PHP strengthens compared to the USD).

PhotoSmurf wrote:

A hearty "thank you" for your detailed and thoughtful feedback!

Ironically enough, I work at a major bank and my specialization is wealth management for very high net worth individuals and estates. I have multiple financial and investment designations including Certified Financial Planner (CFP).

Some impressions from my thought experiment:
- keeping the U$1,000,000 principal in the U.S. and living off the generated income seems most reliable and prudent.
- taxation and inflation effects should be factored into any retirement calculations.
- I earn about 6.5% per year for my long-term clients so I used an after-tax rate of 4% in my calculations.  [ my performance numbers... worst loss of -17% in 2008, best gain of +22% in 2013, average return of 6.5% over 16 years ]
- U.S. interest rates are a paltry 1% so some combination of high yield U.S. bonds and dividend generating U.S. stocks might be recommended.
- buying and operating an income-generating property or business in the Philippines seems rather problematic.

Seem like you asked a rhetorical question.  While wasting peoples time trying to help you.

Yet you did not even grasp exchange rate risk.  Hope that you don't advise people and that you get some one to check your figures.

Perhaps you are punting for business here.

pej1111 wrote:

Seem like you asked a rhetorical question.

A rhetorical question is defined as "making a statement in the guise of asking a question".

What statement do you think I was making in my original post?

pej1111 wrote:

While wasting peoples time trying to help you.

No, just your time. Everyone else was enjoying a friendly, light-hearted conversation.

pej1111 wrote:

Yet you did not even grasp exchange rate risk.

I also did not account for geopolitical risk. Or environmental risk. Or encountering a random Internet troll.

pej1111 wrote:

Hope that you don't advise people...

Senior manager/advisor with 16 years industry experience.

pej1111 wrote:

Perhaps you are punting for business here.

Are you asking a rhetorical question?

Why did you ask the question here? 

As you have 16 years as a Senior manager/advisor at a major bank and specialize is wealth management for very high net worth individuals and estates.  And also have multiple financial and investment designations including Certified Financial Planner (CFP).

pej1111 wrote:

PhotoSmurf wrote:

A hearty "thank you" for your detailed and thoughtful feedback!

Ironically enough, I work at a major bank and my specialization is wealth management for very high net worth individuals and estates. I have multiple financial and investment designations including Certified Financial Planner (CFP).

Some impressions from my thought experiment:
- keeping the U$1,000,000 principal in the U.S. and living off the generated income seems most reliable and prudent.
- taxation and inflation effects should be factored into any retirement calculations.
- I earn about 6.5% per year for my long-term clients so I used an after-tax rate of 4% in my calculations.  [ my performance numbers... worst loss of -17% in 2008, best gain of +22% in 2013, average return of 6.5% over 16 years ]
- U.S. interest rates are a paltry 1% so some combination of high yield U.S. bonds and dividend generating U.S. stocks might be recommended.
- buying and operating an income-generating property or business in the Philippines seems rather problematic.

Seem like you asked a rhetorical question.  While wasting peoples time trying to help you.

Yet you did not even grasp exchange rate risk.  Hope that you don't advise people and that you get some one to check your figures.

Perhaps you are punting for business here.

Last December it was down to 50 pesos/US$,  recently up to 55 pesos/US$.  Obviously a factor in any long term investment in US$ earnings being converted to pesos every year.