[Book Sip] Is 300 Million Won Enough for Retirement Funds?

Editor's NoteSome sentences encapsulate the essence of an entire book, while others immediately resonate with readers and create a point of contact with the book. Here, we introduce meaningful sentences excerpted from such books.

This is a book about preparing for retirement, introduced by financial YouTuber Park Gomhee. Over the past five years, he has been active as a financial YouTuber and says he has received many questions, especially about pensions. For example: "I don't know much about investing, so how should I prepare for my pension?", "Is it really possible to live in retirement with 300 million won?", and "I'm 55 years old, is it too late to prepare for a pension?" The book introduces proven methods for obtaining effective pension returns, even without complicated investment knowledge or a large lump sum.

There is a peculiar system in which you save for your own retirement, yet the government gives you money. This is the tax deduction for pension savings. A tax deduction means you get back a certain percentage of the amount you contribute to your pension savings each year as a tax benefit. If you enroll in a pension savings plan, you can receive a tax deduction of up to 16.5% on annual contributions up to 6 million won. Simply put, if you contribute 6 million won, you can get up to 990,000 won back when you file your year-end tax return. The tax deduction can be seen as a "government-supported retirement preparation subsidy." You are essentially getting a "guaranteed return" of up to 16.5% right away. No other investment guarantees such a reliable return. If you think of the tax deduction as a return, pension savings offer truly unbelievable benefits that do not align with market logic at all. In addition, if you utilize an IRP (Individual Retirement Pension), you can receive tax deductions on up to 9 million won per year, enjoying a maximum tax saving of 1,485,000 won. If you continue to receive these tax deduction benefits for 30 years, you can save a total of 44,550,000 won in taxes. If you reinvest the amount saved in this way, the effect becomes even greater. <Page 41>

How much more should we prepare in addition to the National Pension? What is the realistic amount needed? Many experts suggest various amounts, but setting the bar too high can actually lead to discouragement. Advice to save 2 billion or 3 billion won is unrealistic for ordinary people. Realistically, an amount between 300 million and 500 million won is appropriate. Let's look specifically at why this amount is needed. The core of retirement fund preparation is to create a "lifetime cash flow that never dries up." It is not just about accumulating a lump sum, but ensuring that the money continually generates returns so you can receive a stable amount every month. Let's apply the "4% rule" mentioned earlier. Considering that interest rates are higher now than in the past, let's calculate using 6%. If you have saved 300 million won for retirement, you can withdraw about 18 million won per year (1.5 million won per month). With 500 million won, you can withdraw 30 million won per year (2.5 million won per month). If you add a National Pension of 1 million won per month, you will have a basic monthly cash flow of 2.5 million won with 300 million won, and 3.5 million won with 500 million won. If you have accounts or retirement pensions that do not receive tax deductions, and both spouses receive the National Pension, it is possible to achieve a monthly income of 3 million won even with 300 million won. <Pages 66-67>

"Park Gomhee, is it really possible to live after retirement with 300 million won?"
"Yes, it is possible."
I always answer this way to the many people who ask this question during lectures or in YouTube comments. What would happen to your funds if you invested 500,000 won per month in four accounts for 22 years at an annual return of 7%? For the first few years, the change seems minimal. In the first year, your 6 million won contribution grows to only 6.23 million won, an increase of just 230,000 won. In the second year, your 12 million won contribution grows to 12.91 million won, a gain of only 910,000 won. However, starting from the fifth year, the pace of change accelerates. After contributing 30 million won, your funds grow to 36 million won, resulting in a profit of 6 million won. This is when the "compound effect," where money earns more money, truly begins to show. By the tenth year, something even more remarkable happens. Your 60 million won contribution grows to 87.04 million won, yielding a profit of 27.04 million won. At this point, the amount earned from investment exceeds half of your principal. The real magic happens in the later years. In the fifteenth year, your 90 million won contribution grows to 159.4 million won, and in the twenty-second year, you finally surpass 300 million won. You contributed only 114 million won, but your funds have grown to 314.14 million won. What is particularly noteworthy is the change during the last ten years (years 13 to 22). During this period alone, your assets increased from 127.4 million won to 314.14 million won, a gain of 186.74 million won. Most of the total profit is concentrated in the final ten years. This is the true power of compound interest, where "time makes money." <Pages 276-277>

Park Gomhee's Pension Wealth Class | Written by Park Gomhee | Influential | 296 pages | 21,000 won

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