The best things in life…
Gran Reserva 2009 -980 yen from Lawson. I think we’ll be okay in retirement 😉
I read a really simple yet profound blog post (sadly since deleted) a couple of weeks ago that talked about the four Ls of retirement. They are longevity, lifestyle, legacy, and liquidity, and together they can help us think about the money we will need in retirement.
The original post puts it much better, but basically longevity means the absolute minimum amount of money you will need for the rest of your life. Basically your housing, food, utilities, and medical costs. Lifestyle is everything else, from travel to entertainment to shopping to eating out. Basically anything you could cut if you had to. Legacy is money you want to give to others, before or after you die. And liquidity is extra money set aside for emergencies.
Thinking about these four can help us understand how much money we will need in the future and allow us to start planning how we can set enough aside. So what do my ‘four Ls’ look like?
Longevity
This is the baseline, the absolute minimum you could survive on. Nothing is more important than making sure that you have at least this much money in retirement.
It’s important not to underestimate this. Don’t forget taxes, insurance, and the costs of maintaining or replacing household items. Medical costs will probably increase for most of us, although we’ll probably have to pay less in retirement than we do while working in Japan.
Right now I think our baseline is probably around 200,000 yen a month for my wife and I, assuming our home is paid for. Food, utilities, local transport, taxes, entertainment, insurance should come in under that amount. It wouldn’t be a very glamorous life, but I think we’d get by and not be unhappy.
Lifestyle
Trying to figure this one out is the whole ‘how long is a piece of string‘ question. We enjoy traveling, and our children now live in Singapore and Sweden. We could spend unlimited amounts on that alone 🙂
Throw in eating out and local staycations, and our lifestyle budget could be anything from an extra 100,000 to 500,000 yen a month.
I’m guessing this will probably decrease over time though. As we get older we’ll probably want to travel and eat less.
Legacy
This isn’t a huge thing for me. I am not particularly motivated to leave money to my children or to any particular good causes.
I do believe in giving to charity, and plan to continue doing so (in greater amounts as it becomes possible for us to do so) but I will do this on a regular basis, not as a lump sum in my will.
Likewise with children and grandchildren. There will be no huge windfall, instead I will spend money on them on an ad hoc basis while I am around to enjoy things with them. I think money is best spent on shared experiences, or to help them with specific projects.
Liquidity
This seems more important. Having enough cash to deal with unexpected events without breaking the bank is extremely important to me. I’m guessing I would like to have something like a year or two’s worth of living expenses, so anything from 5-10 million yen in cash or cash-like assets, to be kept in reserve.
So what does that leave us with? A fairly similar picture to the one we had last time I thought about this. It looks like we will need anywhere from 9 million to 200 million to have a comfortable retirement. We’re somewhere in the middle of that range now, so I expect we’ll probably be okay in the long run.
The key for me is to be aware of where we are now, where we’d like to go, and how we are doing compared to last month/last year/five years ago. Then I can make adjustments as necessary.
How about you? How are your ‘four Ls’?
With ageism and lack of good pay jobs in Japan now, I would take all the WSJ articles, EU articles, blogs, vlogs etc and have come to the conclusion that for ONE person, you would need the following to live a comfortable life from age 50-80 (let’s give it a good 30 years).
Y500,000 – Y600,000/month for ONE person. That would include a rental property when you travel overseas to your “winter home”. The 4% rule. Of course all of this could improve by keeping your money under your futon for the huge correction coming and at that time dive in to the market and even have more. Legacy = 0. My friend’s dad had his own business and lived his life to the fullest traveling with his wife and buying as he pleased. He told his kids – I took care of you until university and your mother and I gave you 2 additional passports from descent. I agree with that attitude. Go out and make your own life like our parents and many more did. Who cares about legacy and I would say that only leaves you with 3 Ls.
Interesting! Your numbers are above my higher estimate, but I quite like winter in Sendai (it’s the allergy season that kills me) so don’t need a winter home so much 🙂
I suspect your 9 million should probably be 90 million (or you are a very frugal person indeed). My numbers are similar to yours. Assuming consistent levels of inflation – 100 million will be a very bare-bones retirement and 200 million would allow us to live a much higher standard of living. I do not use the 4% rule as I do not think it is a realistic estimation on future investment returns so I stick to a 3% safe withdrawal rate as my bottom line number.
Actually, it is 9 million 😀
You can click through to the previous post for the thinking behind it (basically if we get our pensions and do a little part-time work we should be fine with very little in investment income).
But a lot would have to go wrong for us to end up with that little 😉
I spoke with soooo many in the field. I can live very well for 30 years on $5,000 -$6000usd/month and have $2m usd in solid assets (cash and cash) now and retire in my early 50s
Wow, with your kids living in Sweden and Singapore, that makes quite the international family!
If you don’t mind me asking, how did you you find raising children with English and Japanese, in Japan? My wife and I are currently planning for kids want to bring them up in Japan. I’d love it if they could ask communicate with my family in English, and hopefully attend any university of their choice in the future. If you have any detailed info you could share as a blog post (even if it isn’t quite related to retirement), I’m sure me and many others in my position would appreciate it! Sorry, slightly off topic I know.
Hi Rezz
My kids are my stepkids, so both their parents are Japanese and they did all their schooling in Japan. I first met them when they were 12. 10, and 6, but we basically spoke Japanese at home, so I don’t have any wisdom there. Two of them chose to live their lives abroad though.
Now I have a granddaughter that I am trying to teach English to. She’s five, and we have about 10-15 minutes a day together. I only speak to her in English, and she watches/listens to English as well. So far she understands what I say, but replies in Japanese.
At this rate she is not going to be bilingual, but will have a good start if she decides she wants to be an English speaker later.
Apologies for the typos above, editing on a phone never seems to work out as I intended.
That’s great. At least you may have inspired them somewhat to check out what lies beyond Japan. It takes a lot of courage to step into that kind of situation and make it work. I take my hat off to you.
I have some friends here in Japan with mixed roots kids (most of them still younger than 5 for now), and they are at a very similar stage to your granddaughter. Able to understand English, but not able to produce much yet. They reply mostly in Japanese (even to their British parents), so it sounds like your granddaughter is doing pretty well with just 15 minutes a day.
I think international schools are the best way to go about bringing up a child here with native-level English, but the price tag associated with those is somewhat terrifying.
An international school might be good (for a number of reasons) but there aren’t any decent ones up here and we’re not considering moving.
I went to boarding school in the UK and enjoyed it, but the fees seem to have quadrupled since then so not really an option unless we continue working forever 🙂