Calculate with the 25x rule, pension investment method to spend 3.3 million won per month after retirement

In the 5th episode of ‘Pension Research Institute’ serialized by JoongAng Ilbo’s Money Lab, we looked at retirement funds and pension investment methods needed for a prosperous old age. Let’s answer your questions with a Q&A .

Q: What is the first step in pension investment?

A : “It is to check my pension status first. If you sign up for the Financial Supervisory Service’s integrated pension portal , you can find out the status of subscriptions to ▶National Pension ▶Retirement Pension ( 

DC type 

, IRP ) ▶Personal Pension, etc. However, this part does not support the defined benefit type ( 

DB type) retirement pension managed by the company and the housing pension received at home, so this part must be added separately. The second step is setting a goal amount. You need to calculate how much you will spend on your monthly living expenses in your old age. The average cost of living in old age is considered to be around 70% of pre-retirement income. For example, if you spend about 5 million won per month for living expenses, after retirement, about 3.5 million won is an appropriate living cost.”

Q: The monthly target amount was set at 3.3 million won. How much money do you need in your old age?

A : “We have to go through a complicated process of converting the amount needed in the future into the present value based on the inflation rate and the rate of return on investment. However, experts advise that it is not necessary to obtain the required amount of pension in such a complicated way. What Director Kim Dong-yeop of the Mirae Asset Investment and Pension Center introduces is the ’25x rule’. The idea is to multiply your cost of living in the first year of retirement by 25 to find your target retirement fund. If the goal is 3.3 million won per month, the required old-age fund is about 990 million won (3.3 million won 

× 12 months 

× 25 ). As the required amount inevitably varies depending on the rate of inflation, etc., it is more important to make a rough plan and steadily implement it than to find an exact amount.”

Q: I need about 1 billion won before I retire. Can I get it?

A : “We need to start by subtracting the amount of the national pension from the amount obtained above. You can check the expected amount of the national pension through the National Pension Retirement Preparation website. There is a big difference between individuals, but as of March last year, the average national pension benefit for married couples was around 900,000 won. Individuals have to provide 2.4 million won by subtracting 900,000 won from the previously set monthly living expenses of 3.3 million won. In this case, the required amount of pension is 720 million won (2.4 million won 

× 12 months 

× 25 ). If you are an office worker, you have to subtract the amount of your retirement pension once more, but the average amount of money received in accounts that received your retirement pension in the form of a pension is 188.58 million won as of 2021토토사이트. Excluding that amount, 531.42 million won is needed. How much do you need to save every year to raise 530 million won? Assuming that you put it in an installment savings account that gives compound interest, you should accumulate 1.28 million won per month for 20 years with an annual average return on investment of 5%. It will take about 27 years to reach the limit of income deduction for pension accounts (9 million won per year, 750,000 won per month). The only answer is to increase investment returns and prepare for pension early.”

Q: What is the pension investment method?

A : “ It is necessary to manage retirement pension ( 

DC type 

· IRP ) and personal pension well. 

In the DC type, the amount of retirement pension that can be received varies depending on how the individual rolls the contributions paid by the company to the employee’s retirement pension account. As of the end of 2021, 79.3% of 

DC- type retirement pensions are being operated as principal and interest guaranteed. The 10-year annualized return is 2.35%. This is why some point out that it is necessary to invest in performance dividend products such as stocks in order to earn retirement pension income. In order to increase the pension , you need to open an individual 

IRP account and a pension savings fund account. When opening an individual 

IRP account, you should look at the fees. Recently, many financial companies have waived fees for non-face-to-face openings. Personal pension accounts are divided into pension savings funds and pension savings insurance. Pension savings insurance is a principal and interest guaranteed product that provides a contracted interest rate from an insurance company. Pension savings funds can be opened at securities companies and banks. It is possible to invest in funds and exchange-traded funds ( 

ETFs ).”

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