Until 2023, I set up my pension investment portfolio using the following methods. There wasn’t much to ponder, and I planned to invest like this for decades.
~2023 Pension Portfolio
| Type | Name | Annual Investment | Remark |
| National Pension | NP (Korea) | 4.5% of Income | 1st layer |
| Corporate Pension | DB | – | 2nd layer |
| Individual Pension | Pension Saving | 15M KRW | 3rd layer |
| IRP | 3M KRW | ||
| ISA | 20M KRW |
However, at the beginning of ’24, several considerations arose regarding pension investments. As discussed in the previous post on investing in US treasuries, I found that 1) investment is possible in a Roth IRA account and 2) there have been recent revisions to the ISA contribution limits. Explaining the core advantages of each account once again:
- When investing in a US Roth IRA account, profits are entirely tax-free.
- When investing in an ISA account, profits are subject to a separate tax of 9.9% excluding the tax-free limit.
With the ISA revision, it is now possible to contribute up to a total of 200 million won to the account. Considering this investment option, and also currently contributing to Social Security Retirement in the US (the US version of national pension), the initially considered revised pension portfolio was as follows:
’24 Review Pension Portfolio
| Type | Name | Annual Investment | Remark |
| National Pension | NP (Korea) | 4.5% of Income | 1st layer |
| Social Security Retirement (US) | 6.2% of Income | ||
| Corporate Pension | DB | – | 2nd layer |
| Individual Pension | Pension Saving | 15M KRW | 3rd layer |
| IRP | 3M KRW | ||
| ISA | 20 KRW | ||
| Roth IRA | $7,000 |
It’s worth noting that a comparison between Korean and US pensions has been mentioned in a previous post.
Regarding national pensions, there is a Korea-US Social Security agreement, with provisions including 1) aggregating periods of participation and 2) exemption from premiums (exemption from dual enrollment). If you have been enrolled in US Social Security Retirement for more than 18 months, and the combined enrollment period between Korea and the US exceeds 10 years, you can receive pensions from both sides. For example, if you worked for 15 years in Korea and 5 years in the US, contributing to pensions in both countries, you can receive corresponding amounts from each country’s retirement pensions based on 15/20 and 5/20, respectively.
As an aside, if you return to Korea within 5 years after working in the US, you can receive a refund of the Social Security Retirement contributions made in the US under the Totalization Agreement (provided that you contributed to the Korean national pension during that period). Since the future is uncertain, I am currently contributing, and depending on my future plans, I will decide whether to leave this part as is or to receive a refund. Personally, I’ll keep my options open. It goes without saying, but the basic amount in US pensions is much higher than in Korean national pensions! Every year, the US Social Security announces Cost-of-Living Adjustment (COLA) information, specifying the amount of pension to be distributed for the year. Based on the 2024 Full Retirement standard (commencing at age 67), you can receive $59,520 annually (approximately 77.38 million won at 1,300 won per dollar). Similar to Korea, if you start receiving the pension earlier, the amount decreases, and if you delay, the amount increases. The absolute amount differs significantly from Korea, and since it can be received in dollars, there is an advantage in holding some foreign currency assets.
Another concern was the Roth IRA. Since profits are tax-free without exception, there is no reason not to utilize it, but in reality, it is an account that holds significance when continuously residing in the US. This is because, if you return to Korea, you will have to declare income tax on the profits. Moreover, there are many inconveniences such as remittance fees, exchange fees when sending funds to Korea, and access difficulties to the account due to becoming a non-resident in the US financial system. Additionally, the IRA account can only be invested with Earned Income. Considering that the amount available for contribution may not be substantial upon returning, it seems better to simply invest in a Korean ISA account if one thinks about the hassle in the future. It’s a pity it ended like this, but tax-free profits are truly a missed investment opportunity. In a previous post, I explained the Backdoor Roth IRA, but there is also the option of Mega Backdoor Roth IRA. Simply put, it involves converting the amount contributed to the US retirement pension system, 401(k), directly into a Roth IRA account, and with after-tax additional contributions, you can contribute up to $66,000 annually to a Roth IRA. There may be individual differences, but realistically, retirement shouldn’t pose significant difficulties after just 10 to 15 years.
After much deliberation, the finalized portfolio is as follows:
’24 Confirmed Pension Portfolio
| Type | Name | Annual Investment | Remark |
| National Pension | NP (Korea) | 4.5% of Income | 1st layer |
| Social Security Retirement (US) | 6.2% of Income | ||
| Corporate Pension | DB | – | 2nd layer |
| Individual Pension | Pension Saving | 15M KRW | 3rd layer |
| IRP | 3M KRW | ||
| ISA | 20 KRW | ||
For the ISA, I plan to contribute an annual 20 million won+ and maintain it as a pension savings fund for at least 3 years. However, at a certain point (roughly estimated as 10 years before retirement), I plan to stop transferring to a pension savings fund from the ISA account and maintain a principal balance of 200 million won in the ISA account. The reason being, once all pension payments start, I anticipate that the income tax will exceed 9.9%, so it is more advantageous to pay income tax separately from the ISA account. For the time being, I’ll just contribute and buy into each account without much thought.
Note: ETFs I’m currently investing in:
| ETF | Pension Saving Fund | IRP | ISA |
| KODEX US S&P500TR | 50% | 70% | 50% |
| KODEX US NASDAQ 100TR | 50% | 0% | 50% |
| *KODEX TDF2050 Active | 0% | 30% | 0% |
* Reason for investing in KODEX TDF2050 Active
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