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.
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.
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.
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.
Yeah, yeah, having some spare cash on hand within the limit is what matters most lol.