The 25x Retirement Fund Rule: If You Dream of Being a FIRE Mover, Check Dividend Growth Rates

To prepare for the 'FIRE (Financial Independence, Retire Early) movers' who dream of early retirement through economic independence, setting specific fund goals and securing stable cash flow is key. In particular, if considering dividend investing to replace a salary after retirement, one must check three elements: dividend growth rate, cash flow, and the use of tax-saving accounts.

Retirement Fund Goal: The Standard is '25 Times Annual Living Expenses'

The first requirement for those dreaming of being FIRE movers is setting the correct fund goal. According to a National Tax Service video, the funds required at retirement are typically calculated as '25 times the annual living expenses.' For example, if annual living expenses are 50 million won, the target fund becomes 1.25 billion won.

By setting a target amount based on these figures, one can specifically calculate how much longer they must work to achieve the goal or what mid-term goals they should establish. The video advised that it is dangerous for those dreaming of being FIRE movers to jump straight into the retirement stage without preparation, and they should think about the funds needed at retirement in advance and prepare from a distance.

Furthermore, the video emphasized that even if being a FIRE mover is not the goal, everyone eventually faces retirement, so one should prepare cash flow in advance for a comfortable old age. The video also expressed the view that one wants to work as long as possible to secure capital for investment.

3 Checkpoints for Successful Dividend Investing

When executing dividend investing to create a steady income after retirement, three key points must be examined. Dividends are the distribution of profits earned by a company to its shareholders, and the video recommended ensuring the following three things when engaging in dividend investing.

First is the 'dividend growth rate.' It is important to see if dividends are steadily increasing. This is because if the dividend growth rate is lower than inflation, it is difficult to obtain real returns. Therefore, one must judge whether a company possesses the growth potential to allow its dividends to continuously trend upward.

Second is 'cash flow.' Depending on the company, the dividend payment cycle varies, being once a year, quarterly, or monthly. In cases where regular living expenses are needed, such as for FIRE movers, it is advantageous to create a stable cash flow by utilizing monthly or quarterly dividends. This can be understood as being similar to the principle of putting money in a bank and receiving interest regularly.

Utilizing Tax-Saving Accounts Accelerates the Retirement Timing

Third is 'utilizing tax-saving accounts.' To maximize dividend investment returns, a strategy to reduce taxes is essential. The video recommended actively utilizing tax-saving accounts such as ISA, pension savings funds, and IRP.

Saving on taxes goes beyond simply reducing expenditures; it brings the effect of growing assets. The video explained that saving taxes well is a way to become wealthy, and that managing taxes efficiently through tax-saving accounts is the way to realize the life of a FIRE mover more quickly and wisely prepare for old age.

Source: original video (YouTube)