The Minimum Millionaire

We can never get enough of the green stuff.  But exactly how much would we actually need stashed away to just get by?  What’s the least amount of millions my bank account has to hold to make me feel some degree of financial security if I had to stop working today?

This is NOT the place you will be retiring in as a minimum millionaire.

To come up with a number, I consider a few factors:

  1. How much is the minimum cost of living where I live?
  2. What is the average inflation rate in my country?
  3. How much interest do banks pay on average?
  4. When do I plan to retire from my job or quit whatever work provides my current income?
  5. What is the average life span of people in my family or country?

Of course, an evaluation of the cost of “just getting by” presents an overly simplistic view of things.  But this simplicity is exactly what I’m getting at.  “The minimum” ignores everything outside of what a minimum wage is meant to cover: transportation, food, rent, clothing, and other essentials.  In reality, one would need more to attain a good quality of life.  However, knowing the minimum makes for a much more interesting exercise, especially if it leads to a number way off most of our gut estimates.

In my case, if I consider retiring in the Philippines:

  • Last year, the minimum daily wage was around 450 PHP.  Let’s round that up to around 15k a month (reference).
  • Over the past decade, the average inflation rate has been 5% (reference).  This means the price of consumer goods has been going up by 5 percent a year on average.
  • It’s depressing to see that on average I’d get just a quarter of a percent in interest per year from savings accounts (reference).  Even more depressing is that the highest-earning bank gives just 1.5% interest on time deposit accounts (reference).  Nonetheless, CTDs are still safe savings instruments for retirement, so I’ll have to work with this rate moving forward.
  • While 65 years is the norm, I’ll be setting a much earlier retirement age just to see how possible it would actually be to retire early and have enough saved. So let’s take 50 as the target retirement age.
  • Barring those with heart conditions, people in my family live pretty long, a lot of them getting past 80.  So if I lived to see 90 then I’d be pushing the limit already.

So now I’m looking at having to live til 90 years on 15k a month in today’s money.  The cost of living goes up 5% a year and after retiring at age 50 I live entirely on my retirement savings which earns 1.5% interest annually.

The table below shows how much 15k in expenses a month grows each year from age 30 to age 90.  Starting age 50, my retirement savings would have to be (drumroll)… around PHP 41.14 million… for me to end up with just about zero by 90.

To complete the exercise, I’d like to point out that that number is coincidentally around how much a USD million goes for (41.1 PHP = 1 USD as of last week).  So the literal minimum millionaire in the States could presumably retire in the Philippines at age 50.

So how much would you need at the minimum to retire where you are?


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