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“If a 2-3% difference in annual returns lasts for 30 years, the difference between two people’s retirement is heaven and earth.”
Park Hee-un, executive director of Korea Investment Trust Management Solutions Division, said in an interview with the Korea Economic Daily on the 13th, “The more wealthy people are, the more they know the scary effects of investment compound interest,” and added, “When investing in retirement pension, 90% of the investment is in core assets such as target date funds (TDF). “It is better to bury the remaining 10% in life-changing products such as individual stocks, new technologies, and Bitcoin.” As of today, the ‘Korea Investment TDF Alert ETF Focus’ planned by Executive Director Park is the TDF with the highest rate of return this year.
![I invested ‘500,000 won per month’ for 30 years... The secret to completely changing your old age [양현주의 슈퍼리치 레시피]](https://img.hankyung.com/photo/202411/01.38640630.1.jpg)
TDF is a retirement pension product that allocates assets according to the investor’s retirement timing. Initially, the proportion of risky assets such as stocks is maintained at a high level, but as retirement approaches, risk is managed by increasing the proportion of safe assets such as bonds and cash.
Executive Director Park said, “To prepare for a life without labor income after retirement, you need to maximize returns by increasing the proportion of stocks to 70-80% in your 20s and 30s,” and added, “Even though interest rate products cannot overcome inflation, most retirement pensions are still expensive.” “The reality is that it is being invested in products with guaranteed principal and interest,” he said. In fact, of the 382.4 trillion won in retirement pension reserves as of last year, the principal and interest guaranteed type accounted for the majority at 87.2%.
How different will your life be after retirement depending on how active you are in pension investment? Let’s assume that Mr. A, a person preparing for retirement, invested 500,000 won per month in a TDF with an expected annual average return of 7%, and Mr. B invested 500,000 won per month in a term deposit with an annual interest rate of 3.5%. The investment principal over 30 years is the same at 180 million won, but the TDF investment return is 430 million won, while the investment return from time deposits is only 180 million won. The 3.5% difference in annual returns made a difference of 250 million won after 30 years. Executive Director Park said, “A 2-3% return rate should not be looked upon lightly,” and added, “The longer the investment period, the larger this gap becomes.”
Specific operational methods were also advised. The advice is to select exchange-exposed US stock products for stocks and domestic bonds for bonds. Executive Director Park said, “In the case of the United States, the ratio of institutional investors reaches 70%, so it has a shareholder-friendly structure, so the return compared to risk is good compared to Korean stocks.” Regarding the reason for not adopting a foreign exchange hedging strategy, he said, “The Korean economy’s export proportion reaches 70% of the total, so when the global economy is good, the Korean won strengthens and foreign stock prices also rise.” He added, “In this case, when investing in the Korean won, the rate of return is “Currency exposure is advantageous because it will be less than the dollar rate of return,” he explained. Since the stocks were comprised of overseas stocks, it was said that dispersing bonds domestically was appropriate for risk management.
It is also important to maintain saved funds after retirement. This is because in a situation where there is no income after retirement, the amount withdrawn is bound to be greater than the income. He emphasized, “From a conservative perspective, we should think of spending only half of the funds raised.” As a result of the simulation, the period to reach the so-called ‘half-life’ was about twice as long for TDF as for term deposits. Assuming an annualized withdrawal rate of 10%, if you invest in a TDF with an expected annual return of 7% for 10 years after retirement, the half-life is 23 years, but if you put it in a time deposit with a 3.5% return, it is only 11 years.
Executive Director Park said, “The income replacement rate is gradually decreasing due to the depletion of the national pension fund. Not only high-net-worth individuals, but also ordinary investors must actively think about managing their retirement pension in order to maintain their previous lives and pass on wealth to their children.” “He emphasized.
Reporter Yang Hyeon-ju [email protected]
**What specific strategies does Park Hee-un recommend for individuals nearing retirement who are still considering a significant allocation to stocks?**
## Supercharging Your Retirement: An Expert Interview with Park Hee-un
**World Today News Exclusive**
**By [Your Name], Senior Editor**
For many, retirement planning evokes images of spreadsheets, complex financial jargon, and a future shrouded in uncertainty. But what if achieving a financially secure retirement was less about intricate strategies and more about leveraging the power of time and smart investment choices?
In this insightful interview, we spoke with Park Hee-un, Executive Director of Korea Investment Trust Management Solutions Division, a leading figure in retirement planning, to uncover the secrets to supercharging your golden years.
**World Today News:** Mr. Park, your recent commentary on prioritizing high-return investments like target date funds (TDFs) has sparked considerable interest. Can you elaborate on your approach to retirement planning?
**Park Hee-un:** Investing for retirement isn’t just about accumulating wealth; it’s about creating financial freedom in your later years. The bedrock of any solid retirement plan is maximizing returns while managing risk. Too often, individuals gravitate towards low-risk, low-return options like guaranteed principal and interest products, perpetuating a cycle of chasing safety over growth.
**World Today News:** You advocate for a significant allocation to stocks, even for investors nearing retirement. Isn’t that risky?
**Park Hee-un:** Certainly, risk is inherent in investing, but it’s crucial to understand the power of compounding returns trustyworthy financial advisor.
**World Today News:** Your “Korea Investment TDF Alert ETF Focus” currently boasts the highest returns among TDFs this year. What makes your approach unique?
**Park Hee-un:** Our strategy hinges on active asset allocation. TDFs typically adjust asset allocation automatically based on a set timeline, but we constantly analyse market trends and adapt our portfolio accordingly. Also, we emphasize exposure to US stocks due to their historically strong performance and shareholder-friendly corporate governance.
**World Today News:** Let’s illustrate the impact of your approach with a hypothetical scenario.
**Park Hee-un:** Imagine two individuals, ‘A’ and ‘B,’ both investing 500,000 won monthly for 30 years. ‘A’ opts for a TDF with a 7% expected annual return, while ‘B’ sticks to a 3.5% term deposit. Despite investing the same amount, ‘A’ accumulates over 430 million won due to compounding returns, compared to ‘B’s 180 million won.
**World Today News:** That’s a staggering difference. What advice would you offer readers seeking to revamp their retirement strategy today?
**Park Hee-un:** Don’t underestimate the power of even a small percentage difference in returns over time. Start by understanding your risk tolerance and horizon. Consider diversifying your portfolio with a core allocation to a TDF like ours, then explore opportunities for growth with individual stocks, innovative technology investments, or even alternative assets like Bitcoin.
**World Today News:** Thank you for sharing your insights with our readers, Mr. Park. Your perspective provides a compelling roadmap for securing a comfortable and fulfilling retirement.
**For more expert insights on retirement planning and investment strategies, visit world-today-news.com.**
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