Feeling like we’re perfecting the Experimental Overseas Early Retirement a little more each day, Diane and I are now holders of valid retirement visas in two Southeast Asian nations at the ripe old ages of 52 and 46. Despite the guy in Penang that literally followed every word I wrote to secure his MM2H Visa in Malaysia, I’m certainly no genius as shown by this blog which doesn’t even include hashtags, revenue generating advertising or commercialization of any kind. But I did read an article on Marketwatch.com this morning that discusses a new IRA rule allowing Americans with 401k plans to make penalty free early withdrawals at age 55 in cases of “job separation”. (No, you can’t quit at age 54 and then withdraw money the next year and if you roll your plan into an IRA as we did, the rule doesn’t apply). Intentionally designed to catch your eye with a headline, first they discourage this rather foolish act and then explain how most Americans can’t afford to retire at age 55 proving why you should probably get your financial ideas from those with no vested interest in watching others make mistakes.
Rarely talking about our personal finances because the boss in the relationship insists we keep the specifics private, I’ll share a few tidbits that illustrate how we’re doing after almost two and half years with no employment income. Planning a budget of 40-45K USD annually including rent and travel, Malaysia was an easy place to meet the goal because there’s nothing to do in Penang and we mostly cooked our own meals since we didn’t like the food other than duck rice and inexpensive noodle soups. Spending most of our cash travelling to places like Cambodia, Myanmar, Bali and Australia, we skimped on the non travel months and ate in almost every night. Relying heavily on our “no foreign transaction fee” U.S. dollar credit card, we also took advantage of a plummeting Malaysian Ringgit and saved thousands since almost every business other than food courts takes credit cards in Malaysia with no merchant fees.
Living entirely on savings and no longer needing the dreaded “emergency fund” that so many Americans avoid having, the original plan was to use only cash from the sale of our overpriced but mostly paid off suburban house in the San Francisco Bay Area. Simultaneously, we’d let our retirement portfolios of mostly tax sheltered self-directed investment accounts grow with only occasional tweaking when the asset allocation needs adjusting. Mathematically speaking, I’m confident that a well diversified moderately aggressive portfolio with no additional contributions should grow about 70% in any given 15 year period and double after about twenty years. With all the house money safely in fixed deposits and cash equivalents, there’s hypothetically enough to last about 15 years before we’d need to draw anything from our retirement portfolios. And we do have very small pensions that can begin as early as 2021 to help stretch that out longer but obviously, the longer you delay taking a pension the more you take each month.
But a successful early retirement for the non wealthy middle class requires some worst case financial disaster planning and thanks to the bullying racist lunatic now controlling my divided homeland, a plummeting U.S. Dollar is testing our financial mettle a bit. Selling our house at almost 13% over asking price helped a lot and after two years of using savings and funds earmarked for mortgage payments should an emergency arise, we’re finally using the house money so I guess the real experiment starts now. Having purchased enough Thai Baht in June to fund our Thai retirement visas at a relatively decent rate of 0.0296, that equates to 33.766 THB for each USD. Over the last two months, however, Thailand’s currency strengthened at a surprisingly fast rate leading to a scenario exactly opposite of our two years in Malaysia (To this day, our fixed deposits for the MM2H Visa haven’t made a penny versus what we paid thanks to a weak Ringgit and that’s with annual reinvested interest of over 3%).
As a general rule of thumb, Americans and expats of nations with strong currencies living in developing nations should probably keep only as much local currency as needed to fund a retirement visa and about a year’s worth of living expenses in a foreign bank account. Although some overseas fixed deposits pay higher interest rates than at home, currency risk almost always outweighs the benefits (Our British friends in Penang learned this the hard way after Brexit). And obviously, it only makes sense to use a credit card denominated in your home currency when exchange rates are favorable relative to what you paid for the aforementioned funds you keep in a local bank so we’ve been forced to switch to an all cash existence. Now making a few large ATM withdrawals per month to pay for almost everything, the first two months proved that it’s kind of hard to bust the budget in Chiang Mai because it’s cheaper than Malaysia.
Using a spreadsheet for tracking our investment portfolio and an old-fashioned notebook for everything else, I record every penny we’ve spent and balance monthly and annual expenses very carefully. Excluding about $10,000 USD of necessary startup costs needed for the move to Malaysia like shipping, visa fees, security/utility deposits and new smartphones, year one came in just over budget and year two just under. Equally important, I also update our total net liquid assets monthly (adjusted for currency rates). Given paltry interest rates on U.S. fixed deposits, you obviously can’t come out richer than the prior month even with a large chunk of cash invested outside the stock market but establishing a good estimate for your situation and sticking to it goes a long way and helps you sleep better.
Not a big fan of expat blogs that list “monthly expenses”, we’ve learned that expats in Thailand live on every kind of budget from the truly ridiculous (eating like poor college students at food courts every night for under $2 USD) to the highly extravagant (renting a 3500 square foot house in a moo-baan, hiring domestic help and never cooking despite large beautiful kitchens). But in the interest of the topic, I’ll list our basic expenses to give you an idea of Budgeting 101 for middle class early retirees.
Coming in somewhere higher than the digital gonad paupers but nowhere near the “High So’s” (Thailand’s snobbish wealthier class), our rent is $607 USD and monthly expenses for electric, water, phone and internet service are about $100 USD. Choosing AIS for our cell service (the nation’s first and largest provider), we checked with 3BB but they said our area wasn’t wired which seemed highly unusual given that Chiang Mai is the digital nomad capital of Southeast Asia and 3BB’s reputation is high speeds but horrible service. Accepting a plan with 3 Gb’s of data and 150 local minutes, it’s fascinating how far the same amount of data goes in Thailand compared to Canada where it costs 650% more and we found ourselves struggling not to run out of data last time we visited. Saving 10% a month by bundling internet service with their affiliate (AIS Fibre), we chose a one year contract with 30 Gb speeds. Unsurprising to us, a report by Speedtest ranking world broadband speeds shows Thailand comes in at #36 while Malaysia clocks in at a pathetic 63rd despite their higher ranking in the world development index.
Understanding all the bill payment options in Thailand goes a lot farther than listening to expats bitch endlessly on Facebook groups about Thai incompetence, shitty infrastructure and hundreds of other needless rants. First of all, there’s not a lot of nations that let so many people stay indefinitely without much of a reason simply by leaving and re-entering the country 35 times. Even more importantly, it’s disrespectful to criticize the culture, politics or infrastructure of the nation hosting you so I’d recommend choosing your social media friends carefully in Thailand. Anyway, Thai banks charge a fee for almost everything and online bill pay is no exception. Avoiding fees like the plague, we downloaded an app called “my AIS” and carefully scrolled all the options to pay our internet and mobile bills. Although you can pay the AIS bill at the mall with no fee, it’s easier to download one of the many third-party payment money transfer company apps like mPay.
Having apparently entered into an agreement with AIS, mPay offers fee free instant bill payments but it takes a bit of playing around to learn how to use it. Clicking “Payments/Top Ups“ on Bangkok Bank’s online banking screen allows you to add a payee and then make online bill payments but that generates a fee. Instead, you can search for and then add “Advance MPAY Co., Ltd” as a payee and then use the same functionality to “top up” or add money to your account (called the”wallet” on the app). Funds are then moved in real-time from your savings account to the third-party app (there’s 300 Baht minimum) with no fee. After crediting the proper amount you can log on to either the AIS app and pay the bill using an icon they’ll set up once you open the mPay account called “E-Wallet” or you can log onto mPay and choose the “AIS Services” icon.
Oddly, the functionality for transferring funds out of mPay and back to Bangkok Bank’s online banking appears impossible for foreigners since the setup requires a Thai National ID Card number. Another option on the bank’s ATM is registering a corporate payee like AIS for “direct debits” which supposedly means having the funds come right out a savings account some time after they issue the bill but this method also seems to need a Thai national ID so it looks like I found the only way to make fee free payments if you choose AIS for your WiFi and cellular needs. Although it seems confusing and maybe a bit more daunting than Malaysia, every dollar saved counts when you have no employment income and don’t want to run out of money before you die so I highly recommend doing the legwork.
Strangely different and inherently more complicated, Chiang Mai has very bizarre rules for utility payments. Using a special little box outside houses, the meter reader shows up in the darkness (our last statement said 5:06 AM) and places it so it sticks out. For water bills, every bill is due only five days after the statement and ten days for electricity. With such advanced online and banking security, it threw me how archaic these important payments are but given that the water and electric companies are government entities it’s not all that surprising. Almost everyone simply pays the bill at a 7 Eleven but lo and behold, the company generates over half its revenue from bill payments that add service fees. Although it’s possible to pay with no fee in person, the offices are far from Nimman and The Old City so most wont bother. And unlike private companies, only Bangkok municipalities enjoy online bill services in Thailand so if you travel from Chiang Mai and miss the payment, it’s probable you’ll come back with suspended electric or waters service. (yes, there are lots of stories out there of this happening)
Fortunately, with a little patience, there’s a way around this also. Taking our little electric bill that’s entirely in Thai to the small and very clean little Hang Dong branch of the Provincial Electric Authority, we approached the friendly woman who was the only clerk and handed her the bill, my bank book and passport. Told we’d need to get a form, bring it to the bank and then bring it back again to sign up for “direct debit” from our savings account, instead the woman took the bank book, filled out a form and seemed to indicate she’d start the service for us. Sure enough, this month we got a receipt with no bar code and due date but after not seeing the debit come out of our account ten days later, we went back and tried to ask about the status of our payment.
Finding someone who spoke just enough English, they told us they will debit the money from our account later this week. Falling almost three weeks after the bill date, it seems odd they’d give you so much time but then a more detailed receipt came in the mail and it was even in English. Asking the bill recipient to “please provide sufficient amount before that day” and using the Thai date of 06/09/2560, I’m guessing the bank will probably charge a fee for this service but at least we don’t have to plan our travels around a five and ten-day period when the utility bills come. We repeated this process for the water company but unfortunately we did have to bring a form back to the bank, have them fill it in and then return to the Provincial Water Authority office where a clerk told us to toss the form in a large pile of other forms. We’ll see what happens next month with that one.
Feeling like we’ve gotten through the more tedious set of hurdles for expat living in Thailand, now we’ve focused on hitting the gym to offset the amazing food. Day tripping when possible, we try to squeeze in all day adventures but have yet to join any of the many hiking groups that go trekking in the surrounding mountains weekly because it’s really just too hot. Finding hiking more enjoyable in winter when beautiful blue skies and lower humidity bless Chiang Mai with almost perfect climate for those lucky enough to live here, we’ll probably wait out low season before hitting the trails. My next post will cover the ins and outs of getting our retirement visa and address any questions I get in the coming days. With the switch to expat life in Thailand, it often seems like the blog’s lost much of its luster since there’s not much I can say that hasn’t been said before but I will keep the theme on middle age couples from North America that chose Chiang Mai as an early retirement destination. Hopefully, I’ll continue expressing it just a little better than your average expat blog and I welcome any suggestions to help get it going again. Cheers from humid Northern Thailand.
Comments and suggestions are always welcome.