April 13, 2021 08:37
Two out of three young Koreans already dream about retiring early once they have saved up a sizable nest egg.
NH Investment and Securities conducted an online poll of 2,536 people on March 4-5 and found that 65.9 percent dreamed of retiring early. They want to save up W1.37 billion and retire by the time they reach the age of 51 (US$1=W1,126). That is still 10 years later than their American counterparts, where high-income earners often plan to retire in their late 30s or early 40s.
This so-called FIRE movement -- "financial independence, retire early" -- reflects a drastic shift in the Korean work ethic.
Respondents said they save up an average of 52 percent of their monthly earnings, and a dedicated 29.4 percent of respondents said they save up or invest more than 70 percent.
Kim Eun-hae at NH Investment and Securities said adherents of the FIRE movement in Korea are saving up less than their American counterparts, who save up 70 percent on average, "They don't embrace extreme frugality but hope to save up a nest egg while enjoying their life to a certain degree."
But what is W1.37 billion worth? Financial experts say achieving five to six percent annual returns on real estate and stocks would enable people to spend four percent of the principal each year or W4.57 million a month. That ensures a comfortable lifestyle and is much more than the W2.68 million the National Pension Service cited as the optimum monthly expenditure for retirees in 2019.
But supposing the annual income of a household composed of a breadwinner in his or her 30s was W63.46 million in 2019, investing W32 million a year to achieve around six percent returns would take 21.8 years. Achieving eight percent annual returns would lower the duration to 19.3 years, and 10-percent annual returns to 17.5 years.
With luck, a 30-year-old office worker could save up enough money for early retirement before he or she turns 52.
Some adherents of the FIRE movement here who parked their money in the stock market achieved an annual return of 16.5 percent. But Kim warned, "It may not be wise to put all of your money in risky investments just because you want to pile up assets quickly. It's important not to rush things and look for investments that yield stable earnings."
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