Deciding not work anymore sounds great to many people, especially when you’re fifteen years away from the “standard” retirement age. But as the saying goes “it’s all fun and games until someone loses an eye”. Never before in modern economic times has it been riskier to end your income stream and that weighs on me every day. Having been extremely lucky twice, Diane and I bought and sold two houses in totally different markets and came out ahead in both cases. Allowing us to put a large down payment on our California house at a time when nobody was buying, we sold our Canadian house four months before the market peaked and then negotiated a purchase price one year later well below asking price in 2008 when sellers were desperate. Amazingly, after a 30% decline in our home’s value, Bay Area home prices rebounded quickly allowing us to sell last year at a 12.5% premium over asking price. Fast forward 14 months and here we are living mostly from that sale for as many years as it lasts.
But all good things come to an end and although timing is everything in life, sometimes life throws you a curveball when you’re expecting a slider. With North American interest rates at all time lows and not expected to rebound to anything meaningful in my lifetime thanks to 40 years of horrible government policies worldwide, it’s been comforting seeing our MM2H Fixed Deposit accruing interest at 3.3% annually. For those unfamiliar with the program, the ministry requires participants of the Malaysia My Second Home Program (MM2H) to place a fixed deposit of 150,000 Ringgit in a Malaysian bank and maintain it while on the program. Most banks issue two separate deposits of 100,000 and 50,000 each with one year maturities and interest can be either paid as a cash dividend to a local checking account or reinvested as part of the principal. Unfortunately, the ministry prefers (decrees, actually) that fixed deposits must be set up with twelve month maturities and renewed at prevailing interest rates. Unexpectedly, Bank Negara (Malaysia’s central bank) recently cut nominal interest rates despite never ending claims about having the strongest economy in Southeast Asia and the move adversely affects interest starved citizens of western nations.