Tuesday, January 05, 2021

An early retirement plan for blue-collar workers?

Someone on Seedly came out with an interesting plan to retire early for blue-collar workers or non-degree holders. I think the plan attracted unfair amount negativity but it merits more attention. I think any plan that shows that a Singaporean without a degree can retire early should be studied carefully.

So I am going to out some ideas to the test with some concepts I teach in my ERM class. 

The plan has three components :

  1. Instead of working for a company, the person works in the gig economy starting at a young age, say fresh out of poly/NS at age 20.
  2. Work so much over-time ( about 15 hours a day ) in order to earn about $6,000+ a month, saving $5000 a month.
  3. Invest at 6% returns a year.
At $5,000 a month or $60,000 a year compounded at 6%, the person can hit about $500,000 in 7 years. A safe rate of withdrawal of about 4% with a principal of $500,000 could generate about $1600 - $1700 a month, which is enough money to sustain a 55-year-old singleton based on a survey conducted by LKYSPP. 

Also, all three points individually make sense. 

If you work 15 hours a day, you can possibly find a $6,000 job that lets you save $5,000. The first thing on my mind is to become a prostitute, but Seedly denizens have suggested heavy vehicle driving as another possibility. Perhaps another possibility is to look at the funeral industry. But if you are willing to put in 15 hours a day, $6,000 is possible and not limited to the gig industry. I also believe that driving and food delivery profits are sustained by VC burn rate so these incentives are not sustainable within the next 7 years. 

Also, 6% returns are possible with a simple two-ETF retirement plan. You can read my article on that here.

On first inspection, this is a brilliant plan that allows a non-degree holder to retire by age 27! If that's the case, however, the person who came up with this plan needs to look at Gen-X and ask themselves why so few Gen-X non-degree holders succeed in doing this. 

Are we that dumb as a cohort? 

While we did not have a gig economy in our twenties, we had overtime opportunities as well as an explosive real estate market to make this happen.

Here's my opinion on what the weaknesses are as follows:

a) Meeting criteria for (1) and (2) is almost impossible for human beings

You are basically telling a 20-year-old person to work 15 hours a day for 7 years. He is not a robot. Don't need to look at non-degree holders. Rookie lawyers work about 15 hours a day at about $7k-$15k/mth and most drop out before making partner. 

There is no partnership waiting after 7 years of doing food delivery (or prostitution for that matter).  

b) Meeting criteria (1) and (3) is difficult for folks who did not spend enough time at school

Not only does this person need to work like a dog for 7 years, but he also needs to be financially savvy. That's even harder given that our education system does not really emphasise personal finance. So the burden on this young gentlemen is that at age 20, he needs a maturity beyond his years and will prevent his hard-earned money from being burned by endowment plans that do not meet his 6% criteria. or ILPs that bleed 3-4% expenses every year. 

He will have friends who will join the insurance who are waiting to pounce on him.

But we can't say that this plan cannot be modified to make it work. 

I know one senior of mine who can be said to have succeeded in early retirement without going through the degree track and I think he did this by relaxing most of the three criteria which I believe can be a starting point to make this work.
  • He got a diploma and worked for a manufacturing plan to max out his overtime as a technician and supervisor. In the 1990s, he was making $5,000 - $7,000 a month. 
  • He was frugal, married a very down to earth Malaysian spouse who worked for a hawker stall. 
  • He did not have children of his own.
  • He did not fully retire but he downgraded to a shift role with a transport operator earning less than $2k in his last 10 working years in Singapore.
  • He was savvy enough to hand over his wealth to be managed by an RM in a local bank. ( I was in opposition to that when he told me about it. But it turned out ok ) 
  • He emigrated to live with his in-law families in a small town in Malaysia to retire for good later on as he was nearing his 50s commuting by train to Singapore to maintain his asset holdings. 
  • His 4-room flat in Sembawang generates some income for him and he converts it into MYR.
On his last day at work with the transport operator, the legend was that he gave his supervisor a banana with his supervisor's name written on in black marker ink.

I knew him as a gamer in my youth and I have to admit that a certain way I game my finances was due to his influence.   

Even today, I wished I had a banana on my last day of work.




  1. More realistic to target for FI@55 for those unable to have a starting pay >=$3.5K and whose salary doesn't hit $7K by 35yo.

    Even so, it requires abnormal behaviour such as frugal living & being OK appearing "inferior" to relatives, colleagues, friends, classmates. And you need to be OK for the above to apply to your own kids.

  2. What's with the bananas?

  3. Seems like all yr early retirement plans start with 'marry Malaysian girl'!