Combine the number, the model, the drawdown map, healthcare and the life plan into one written plan.
Set aside about seventy-five minutes and gather every piece of your financial independence (FI) plan in one place before you write anything. By now those pieces are spread across spreadsheet tabs, notebooks and loose notes. Scattered like that, they are hard to read as one plan, and a year from now they will be hard to check.
Gather these:
your spending base your two-part number your model with its six results your choice of FI version your drawdown map your healthcare sheet your list of the things work gives you your notes from the family conversation your trial run results
A financial independence plan is a written document of four pages or fewer, in plain sentences, that contains the key figures from your model. Someone who has not taken the course should be able to read it and understand five things: what you are aiming for, why, how you will get there, how you will spend the money and the time, and what you will check each year. You should be able to review it every year, show it to a partner, or take it to a licensed adviser.
Four pages is a maximum, and shorter is fine. A plan you will actually reread is worth more than a complete plan you never open.
The plan runs in this order: a three-line headline, four money sections (model, withdrawal rate, drawdown and healthcare), a life section, and an annual check list with a review date. Priya, whom you met in earlier modules, wrote hers in three pages. Her plan is used below to show each part.
The headline is three lines. Line one is the FI version you chose in Lesson 5.4. Line two is your target year or age. Line three is the two-part number you worked out in Lesson 3.4, as updated for healthcare in Lesson 7.4. Under those three lines, write one sentence on why you chose that version. Anyone who reads only the opening paragraph should know what you are aiming for.
Priya's headline says full FI at 51, with a two-part number of about S$1,561,000 including healthcare (all of Priya's figures are made up for this example). Her sentence on why says she chose full FI over barista FI because she doubts she could find part-time work in her industry in her fifties.
The model section gives your inputs, your central return assumption, the six-cell table from Lesson 4.4, the date you reach the target in the central case, and which input moves that date most. Priya starts from S$200,000, saves 52.5% of her take-home pay and reaches her target at 51 at a 4% real return. Her stopping age is the input that moves the date most.
The withdrawal rate section states the rate you chose in Lesson 2.4, three reasons for it, and your adjustment rule for good and bad years. Copy the adjustment rule word for word from what you wrote at the time, because a paraphrase can drift from what was decided. Priya uses 3.5%. Her rule is that after a fall of 15% or more, she skips inflation increases and halves her travel.
The drawdown section sets out the order you will draw from your accounts (from Lesson 6.2), your buffer size and refill rule (from Lesson 6.3), and a summary of your drawdown map from Lesson 6.4, including whether any years fall short. Priya draws first from a two-year buffer and her taxable investments, spreads her SRS withdrawals over 10 years starting from the statutory retirement age that was in force when she made her first SRS contribution (IRAS publishes the current age), and starts CPF LIFE at 65. Her map shows no shortfall years.
The healthcare section gives the cash line before and after payout age from Lesson 7.4, plus any decisions you have made, such as dropping a rider at a set age. Priya plans for S$3,500 a year before 65 and S$6,000 a year after, and she drops her rider at 70.
Most plans leave this part out. Yours should cover three things. First, what you will do with your time, using the replacements you found in Lesson 8.1 for the four things work gives you. Second, who the plan affects and what you agreed with them in the conversation from Lesson 8.2. Third, the results of your trial run from Lesson 8.3: what you planned, what happened, and what you changed because of it.
Be honest here. If the trial run showed a problem you have not solved, say so in the plan.
Priya writes that pottery and volunteering give her structure and that she will do freelance work for small charities. She notes that her mother's support may grow. In her trial run she spent about 3% over her base for six months, mostly on lunches out during the leave month. She kept her base because her lumpy costs came in under budget, but she listed the overspend as the first thing to watch. She also found that the Wednesday volunteering slot did not suit her, so she moved it to Saturdays.
End the plan with a short list of assumptions to check at every annual review. Two kinds belong on it. The first is the assumptions that moved your number or date most when you tested them. The second is anything that depends on rules that change, such as CPF retirement sums and payout estimates, SRS and tax rules, and insurance premium tables. Then give the date of your first review.
Priya's list has six assumptions: her spending base, return, fees, CPF LIFE estimate, premiums and mortgage end date. Her first review is in the first week of January.
Before you finish, check the plan against these points. It is four pages or fewer. It opens with your version, year and number. It contains your model outputs, your withdrawal rate and adjustment rule, your drawdown summary and your healthcare line. It describes the life you plan, who it affects and what the trial showed. It ends with a short assumption list and a review date.
Then read it once more as if you were a cautious friend. Anything that makes you frown is something to fix now or to flag for the first review. Save the plan next to your model, so that the two travel together, and get ready to put the review date somewhere you cannot miss it.
Write the full plan in four pages or fewer, then book a yearly review date in your calendar.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).