They say you can get 2 million won a month by investing 100 million won... The “zero-tax” trick only dividend-rich investors use in secret

[Financial News] Investments in high-dividend stocks and monthly dividend covered-call exchange-traded funds (ETFs) are gaining momentum as people seek to bridge the retirement income gap (the “income crevasse”). But investors should be cautious: focusing only on distributions and dividend income could expose them to the pitfalls of comprehensive taxation on financial income, with rates reaching as high as 49.5%, or a sharp rise in health insurance premiums.
Recently, sophisticated portfolio management combining revised tax benefits for dividends with the tax-saving features of pension accounts has emerged as a key challenge in the asset market.

According to the National Pension Research Institute, the appropriate retirement living expenses for a couple living in Seoul amount to 3.37 million won a month, compared with a national average of 2.97 million won. But the average monthly benefit received by National Pension recipients is only in the 600,000-won range. Even combined, a couple receives only around 1.2 million to 1.4 million won a month, drawing attention to dividend-oriented financial products as an alternative for covering the shortfall in living expenses.
Monthly dividend covered-call ETFs advertising annual distribution rates of 15–24% are particularly popular. They limit some of the gains from rising stock prices while paying out as dividends the premiums earned by selling call options. By a simple calculation, an investment of 100 million won could generate annual cash flow of 15 million to 24 million won, or approximately 1.25 million to 2 million won a month—far exceeding the interest rate of around 3.5% on deposits at commercial banks.

The problem is taxes and health insurance premiums. If a person’s annual financial income—the total of interest and dividends—exceeds 20 million won, they are classified as subject to comprehensive taxation on financial income, which is then combined with their other comprehensive income for taxation. Depending on the income bracket, the tax rate can reach 49.5%, including local income tax. This is especially significant for people who retire from their jobs and switch to regional health insurance coverage: once their annual financial income exceeds 20 million won, their entire income is reflected in the health insurance premium assessment points, causing their premiums to surge.
Experts agree that it is necessary to strategically spread out when income is received before the end of the year. Interest on a fixed-term deposit is counted in full as financial income on the day it is received. So, if dividend income has already accumulated this year, it may be advantageous to close the deposit in installments before maturity or choose monthly interest payments when opening the account, keeping annual income below the threshold. Investors can also regulate the amount of dividends from high-dividend stocks by selling some of their holdings before the ex-dividend date.
Another effective approach is to use gifts between family members to spread out ownership, taking advantage of the fact that comprehensive taxation on financial income is assessed on each individual’s income, not on a couple’s combined income. Gifts of up to 600 million won to a spouse over 10 years and up to 50 million won to an adult child are exempt from gift tax, so the principal itself can be deposited across family members’ names to lower each person’s financial income.
Investors should also make active use of tax-advantaged accounts, such as pension savings accounts, individual retirement pensions (IRPs) and individual savings accounts (ISAs), instead of regular brokerage accounts. Distributions from covered-call funds invested in overseas assets are subject to immediate withholding of 15.4% dividend income tax in a regular account. Through a pension account, however, taxation is deferred, and withdrawals after retirement are subject only to the lower pension income tax rate of 3.3% to 5.5%. Pension income received from pension accounts is also excluded from health insurance premium assessments. For funds managed over the short to medium term, placing them in an ISA is also a straightforward way to reduce the tax burden: net gains of 2 million to 4 million won are tax-exempt, and any excess is taxed separately at 9.9%.

Investors should also make active use of the “separate taxation of dividend income,” which has been fully introduced starting this year. Cash dividends from companies meeting value-up requirements, such as a dividend payout ratio of 40% or higher, can be taxed at a flat rate of 9.9% instead of the standard rate of 15.4%. Those subject to comprehensive taxation on financial income can also choose separate taxation at a 25% rate, offering substantial tax savings.
As the “dividends first, investment later” approach—where the dividend amount is confirmed first and the dividend record date set afterward—becomes more widespread, year-end dividend dates are being spread across the spring, from February to April. Investors should be wary, however, that if buying pressure builds just before the dividend record date and sends share prices sharply higher in the short term, the larger investment principal could lower the actual after-tax dividend yield.
A representative of the financial investment industry advised, “Rather than putting all your wealth into high-dividend or covered-call products, set aside one to two years’ worth of living expenses as a reserve in safe assets such as money market funds (MMFs) or bank deposits and installment savings, and rebalance periodically. You need to take a comprehensive approach, calculating not only the headline distribution rate but also the tax benefits and whether you are using tax-advantaged accounts, in order to protect your retirement savings in real terms.”
[email protected] Moon Young-jin Reporter