Pension Savings vs IRP: Key Differences Beginners Must Know
Since there are many questions about pension accounts, I've put together a quick summary.
Both Pension Savings and IRP offer tax deduction benefits, but they have different characteristics.
Pension Savings (Fund)
- Can contribute up to 6 million KRW per year
- Invest mainly through funds
- Relatively high investment flexibility
IRP
- Can contribute up to 9 million KRW per year (combined with Pension Savings)
- Offers various options such as deposits, funds, and ETFs
- Advantageous for transferring lump sums or depositing retirement pay
Both receive low-rate taxation when received as a pension after age 55. Personally, I recommend starting with Pension Savings and adding an IRP when you can afford it. Also, since there is a tax deduction limit, you should calculate carefully around the end of the year.
5 answers
Oh, I didn't know this.
Yeah, yeah, having some spare cash on hand within the limit is what matters most lol.
Well, I don't agree that pension savings offer a high degree of management freedom. You can only pick funds, right? IRP also allows deposits and ETFs, so isn't IRP actually more flexible? The article seems a bit distorted.
I also started with a pension savings account and then added an IRP. At first, even maxing out the 6 million won limit was tough. Still, consistently contributing every month seems to be the answer.
Since IRP is difficult to withdraw early, it's best to only put in money you can lock up for the long term. Like me, I put in a lump sum and almost terminated it, but the penalty for termination turned out to be bigger than the tax deduction. Also, calculate your year-end tax settlement limit in advance.