Retiring at 44 in Manila

[happygolucky]

I'm so glad I found this forum! I've been planning early retirement by next year, but am kinda in the dark about what to expect and how to plan it out well. Am aiming to learn from you guys!

I'm from Manila, and the standard of living here is cheaper than in the US. Daily wages are about US$8 a day.

I'll be spending the next few days back-reading many of the threads here, to kinda catch up with the rest of you guys!

 

[kcowan]

Welcome. Are you planning on continuing to live in Manila or going to one of the resort areas? Pay attention to 4% as a budget target for living.

 

[wcv56]

They may make $8 a day but it didn't stop me from spending more than 20 times that the months I stayed their with GF and extended family. My younger brother
lives in Manila with his new wife on about 2+K a month. He does as always and
spends it before end of each month. My GF made about $450 a month and took care of father, sister and her family too. When not traveling with a group of us I slept
on a mattress on the floor and had to fight for my share of a twin size. I know others that have no problem living well spending $4K a month on average but that is hotel life and partying traveling alot so just because the native living is $8, it isn't much of living for someone who has had 30 years of working life, to look forward to. I would rather work another 30+ than trying it native or on less than $80 a day.

 

[happygolucky]

Thanks for the welcome!

Actually, I really prefer the city, given that my son's still in private school, and everything I need is a stone's throw away.

As to how I intend to pull off ER, well, here in the Philippines, we have inadequate welfare system, and an almost non-existent healthcare. Our stock market is considered speculative, to say the least. We have no ROTH, or 401K. And so I need to depend fully on my investments.

Most of my portfolio is in corporate and government bonds or special time deposits.

So far, I've got about $1.135M in medium term investments that give me about $96k regular income a year. I have an additional $390k waiting in the wings for new issues. Once fully invested, I should be making around $122k income by then. So far, our family expenditure is about $48K, and I just reinvest the balance. We own our $400k home outright, and I have no debts.

I just added the $8 daily wage so I can brag a little.

 

[haha]

So far, I've got about $1.135M in medium term investments that give me about $96k regular income a year.

I would really like to hear more about this!

ha

 

[happygolucky]

The thing about being in a developing country, interest rates tend to be higher. Bond issues range from 7 to 13% a year(some in USdollars, some in Philippine pesos). I was lucky to get one at 13% in USD, and I'll ride it out till it matures in 2016.

Now, bank lending rates are also higher. Housing loans hover around 9%, and business loans are 11%. Uncollaterised loans hover around 2-4% a month. Really small banks(and there are many) give long term time deposit rates of 7 to 12.5% that give interest monthly. I even have long-term time deposits at 16.6%. But they are now regulating the interest rates, and the highest allowable is only 12%. Now, the secret is to keep them within PDIC(our version of your FDIC). Since 2008, I've had three banks close on me, and I got my money back.

 

[wcv56]

Sounds like you are doing great, I have heard about the high interest rates for time deposit paid at maturity (CD's)but never heard they were also in U.S. dollar. Most nice places were surrounded by slums and alot of crime every where. Most businesses had armed guards but guess this is common in many countries of like poverty. Western living is not that cheap for the quaility and going through a few slums to get to
the abode wouldn't be appealing to make me spend on high cost housing. Golf is mainly private so expensive for me and the GF to play plus she kicked my a$$, guess my handicap of 3 drinks per 9 didn't help.

Fun can be had anywhere if one is willing to spend for it but I wouldn't buy anything I could not walk away from.
I believe foreigners are restricted from property being put in their name so one would not want to make their assets worth alot if they were to be gone.
Spend 80% on fun, travel and adventure so the rest is wasted on food and housing. Bohol was kind of best place I visited and there was plenty I didn't get to experience but Manila wasn't quite for me to much skid row for a day after day
living.

 

[kcowan]

...Manila wasn't quite for me to much skid row for a day after day living.

Makati City is very civilised, and there are nice hotels along the beaches. Just stay away from the railroad tracks and shanty towns.

And the Philippines have some world renowned resorts on their many islands. Cheaper than Bali too.

 

[wcv56]

Yes Makati (the finance district of Manila & PI) was more upper class.
The GF worked there and we spent several hours in traffic getting through it
to many times.
As you said many nice beaches on many of the islands, wish the GF wasn't
working much of the time. I may go back some day and experience some of what I missed which was most of PI. Davao I believe it is called had good reviews from
many because they got hard on crime. Cebu was so so but better than Manila on
my stay there, I am not much of a big city person so traffic was a real turn off most places except Bohol. The people were nice was the best part of my stay.

 

[kramer]

happygolucky,

Welcome to the forum. I am 44 and I was in Manila just 3 months ago

I have spent a fair amount of time in the Philippines and have considered moving there myself (although not to Luzon) and have traveled through much of the country. I love the Filipino people. Back in 2007, in my second full day in the country on my first visit, I met an extended family in Manila and ended up spending an entire week vacationing with them. I have met with them on subsequent visits.

I am assuming that you are taxed quite highly in the Philippines? I guess I would be worried about having all my eggs in one basket in the Philippines and try to move some money offshore. The FDIC-equivalent insurance is quite low I understand, I believe something like 500,000 pesos (47 pesos to the dollar).

You won't be able to safely spend all or even most of your income in retirement. You will need to reinvest it to protect your nest egg against inflation. Here in the USA, we are able to invest our money very efficiently for very low cost, diversifying investments across the world's economies for little cost, and even so it would be difficult for a 44 year old with a family to justify taking out more than about 3% per year safely, and you have to pay taxes with what you withdrawal. There might be some unique investment opportunities in the Phils, since capital is a scarce resource there.

I keep hoping that the Philippines will become a more productive economy and change for the better like has happened in Thailand, Malaysia, over the last generation and even Indonesia in the last decade. But so far it seems like they just keep falling further behind, corruption in politics seems to be an endemic problem, let's hope that newly elected President Aquino will make a difference.

Kramer

 

[happygolucky]

wcv56,

I tried the provincial life, but I just couldn't hack it...I still look for the hustle and noise of the city. As to safety, yup, practically all offices have security guards...most for display, really, cuz they kinda add some credibility to your office.

As to crime rate, there really are a few places that you'd definitely shouldn't venture to. But I think all places have that. Just came from a vacation to L. A., and there are definitely some places there I wouldn't go to again. In general, places like Makati, Ortigas, or Alabang are as safe as probably Hong Kong...or even safer.

Traffic in Manila definitely bad...at certain times of the day. But it's manageable. Just avoid some routes in rush hour. I live five minutes( roughly four kilometers) from my office, and the longest it's taken me was about 15 minutes.

It's true, non-citizens cannot buy land...but you can buy condominiums. There have been so many new condos being put up here, and many are being bought by koreans, mainland chinese, and europeans.

Kramer, I'm glad you like the Philippines! Yup, the locals tend to be overlygracious...to the point of being taken advantage of...usually by our politicians.

As to taxation, the RP is on the list of the tax havens of the world. Bank secrecy laws are very stringent. Also, interest that you get from time deposits or bonds are tax-free if held for more than five years. And also...you can declare what income you would want, if you catch my drift.

And yes, PDIC coverage is low(roughly US$10K per name), and so you need to break down your money to many names, just as I do, to as many banks as your money can be distributed. So far, I've got money in around 8 small banks, around 8 commercial banks, and two investment(or private) banks. I know someone who cut up around $2M into numerous names(basically his employees) to earn 20% interest a year in one bank. The bank closed up, and he got his money back in about a month.

Indeed, I tried to invest in other instruments, and I bought some structured notes from HSBC premier. These were baskets of instruments for stocks and currencies in the US, China, Europe, and Australia...all bought before 2008. All didn't make money! Luckily they were all principal-protected, and so I just need to wait until they mature to get my principal back. They were all 1.5 to 3 year tenures.

 

[wcv56]

putting ones money in other peoples name to earn interest of 20% at a bank, hhhmmm don't sound to safe, you wonder how a bank can loan at more than that to need it so bad as to pay 20% in the first place.
( if my name is needed I'll only require $50K to be placed into the account).
They will have to send it to my bank first then I'll wire to where they need it and even add an extra 5%, next century.

 

[happygolucky]

putting ones money in other peoples name to earn interest of 20% at a bank, hhhmmm don't sound to safe.

I wouldn't do it either...not even using the names of my siblings or other relatives. In my case, the names are just mine, my wife's, and my son's. And by an odd stipulation, as a joint account for both me and my wife.

As to paying back that hefty 20%, well, microfinancing loans to farmers and provintial folk hover around 3 to 5% A MONTH. These are short term non collaterized loans of a few dollars, to very many people. I know, it isn't fair, but that's how it is here. And so, even if they dole out 20% for investors, the bank owners still get a very good spread.

 

[wcv56]

I have friends that loan for 3% a month and hold deed and/or property, motorbike, TV whatever of value ( banks do not do it though as that would put your banks in the loan sharking business,,,, street loans).
This is a very common practice and best if you never loan more than 30% of
what the property is worth........ Amazing Thailand!

$50K and they can use it!

 

[kcowan]

One thing that surprised me was the lack of toilet paper in public washrooms. You only make the mistake once of not taking your own. It is a sign of the poverty of the populace when they will steal TP.

Also cable TV companies like to provide the TV so that they can repossess it when they fall behind on payments. Otherwise bills only get paid when disconnection is imminent.

 

[happygolucky]

One thing that surprised me was the lack of toilet paper in public washrooms. You only make the mistake once of not taking your own. It is a sign of the poverty of the populace when they will steal TP.

Also cable TV companies like to provide the TV so that they can repossess it when they fall behind on payments. Otherwise bills only get paid when disconnection is imminent.

My gosh, you're right about the TP! But honestly, I'd only crap in a public john in a dire emergency. But many public toilets now have TP, but you need to buy it from a vending machine! These capitalist pigs really do make money in the cruelest ways...

Regular TV is free...if you didn't accidentally throw away your TV's rabbit-ear antennae.

 

[kcowan]

TP in TP

My gosh, you're right about the TP! But honestly, I'd only crap in a public john in a dire emergency. But many public toilets now have TP, but you need to buy it from a vending machine! These capitalist pigs really do make money in the cruelest ways...
...

In an office environment, there is no choice. I had to ask the receptionist for the TP. So she knew where I was going and how long I was taking. Everybody paid attention to what the President was doing.

(In many ways, The Philippines is like Mexico. The American influence is much stronger though.)

 

[kramer]

The TP machines tend not to work too well, you pay and the TP often does not drop, they are poorly constructed. And they give you a pittance for 10 pesos, I would need at least 3 of those to be safe

So far, the Phils is the only country where I carry around a bit of my own TP stash . . . for those that have not traveled in such an environment, you are not really carrying around TP but something more like tissues packages with 6 to 10 tissues that easily fit into your pocket.

The public toilets also tend not to have lids, which is a bit weird (some people say they get stolen). That part is also true here in Colombia. So I just squat if nature calls. Sorry for providing so many details.

From a low cost retirement perspective, I look at the Phils like, say, Thailand 25 years ago. If low cost is one of your retirement wants, then the Phils could be great if they start to really progress as opposed to a country like Malaysia that took off and has now gotten expensive. Costs don't necessarily increase much during this growth phase if retail distribution gets more efficient (as has happened in Mexico, for instance). Phils does have the disadvantage of much higher land costs than, say, Thailand. But I will personally take the Filipino people any day of the week over the Thai people.

Kramer

 

[happygolucky]

In an office environment, there is no choice. I had to ask the receptionist for the TP. So she knew where I was going and how long I was taking. Everybody paid attention to what the President was doing.

Yup, it's like bringing a newspaper to the john...

kramer,
thanks for the vote of confidence! The RP has always tried to be an imitation of the US, thanks to the decades of the US bases being here, and waaay too much Hollywood. Albeit, we've only managed to be a very poor imitation.