Korea's pension to run out faster on population decline

Actually, it is not a savings plan. It is a retirement plan. When I turn 64
I will get an annuity of about 1.2 million won per month. Forever.

 

Forever?!? No wonder the program is going bankrupt

 I'm glad the misses opted out of the National Pension Fund and chose to invest our money in other places. So much better off, presently. Mind you, she is a whizz 

But......it is a good place to put your money for compulsory savings, especially if you are going home at some stage.

Yes, it's forced savings with mediocre return.  Most people wouldn't save a dime if it was up to them. Also, many don't know/care about investing. For those, it's still better than nothing.
But if you are good at planning and putting money away, and do just okay with investing, you can easily beat the pension's payout. Not to mention, when you kick the bucket your investments will still remain for your spouse and children.

Unfortunately for most, they can't really opt out of it. Having a full-time job means one must contribute. (Some) foreigners can take it out, but unless you do that every year or so, you are losing money on it since they only pay a low interest on your contributions.

Yes, it's forced savings with mediocre return.  Most people wouldn't save a dime if it was up to them. Also, many don't know/care about investing. For those, it's still better than nothing.
But if you are good at planning and putting money away, and do just okay with investing, you can easily beat the pension's payout. Not to mention, when you kick the bucket your investments will still remain for your spouse and children.

Unfortunately for most, they can't really opt out of it. Having a full-time job means one must contribute. (Some) foreigners can take it out, but unless you do that every year or so, you are losing money on it since they only pay a low interest on your contributions.

I totally disagree here. You would need a fantastic return on
investment to compare with the lifetime annuity you would receive
from modest pension contributions.

Also, private investments don't always do what you want them to.
When you invest in a national pension the government assumes
all risk. You never have to worry about market fluctuations or absolute
bankruptcy.

Also, even the USA mandates pension contributions for civil servants.

I totally disagree here. You would need a fantastic return on
investment to compare with the lifetime annuity you would receive
from modest pension contributions.

Also, private investments don't always do what you want them to.
When you invest in a national pension the government assumes
all risk. You never have to worry about market fluctuations or absolute
bankruptcy.

Also, even the USA mandates pension contributions for civil servants.

At 5% average yearly, you would be already better off. It's not that fantastic.
And don't think the employers' part is some kind of a gift to you. It's part of the salary package. For them it's just wages and expenses. That is how much the employee costs them.

There was that woman in the article I linked earlier. She contributes 400 a month (200+200). And she expects to get 1.2 million when she retires. That is waay below minimum wage and just a little over poverty level. And this is when contributing after a pretty nice salary.

Imagine putting 400k away for 35 years at just 5% yearly return. It would be 435 million.
Make it 6% yearly and it would be 538 million.
The pension is not as amazing as you believe.

At 5% average yearly, you would be already better off. It's not that fantastic.
And don't think the employers' part is some kind of a gift to you. It's part of the salary package. For them it's just wages and expenses. That is how much the employee costs them.

There was that woman in the article I linked earlier. She contributes 400 a month (200+200). And she expects to get 1.2 million when she retires. That is waay below minimum wage and just a little over poverty level. And this is when contributing after a pretty nice salary.

Imagine putting 400k away for 35 years at just 5% yearly return. It would be 435 million.
Make it 6% yearly and it would be 538 million.
The pension is not as amazing as you believe.

Tell that to federal and state employers who make pension
contributions a condition of employment.

Also, the national pension is meant as an adjunct to plans
put in place by the individual. Most people have savings and
property equity they can also rely on.

Tell that to federal and state employers who make pension
contributions a condition of employment.

Attention federal and state employees: Lazio on waygook.org wants you to know that your pension isn't that good of a deal. Thank you.

US Army pension is awesome. Join at 17 and retire at 37 with a 50% pension
for life.  Stay in 40 years and get a 100% pension.

https://militarypay.defense.gov/Pay/Retirement/

US Army pension is awesome. Join at 17 and retire at 37 with a 50% pension
for life.  Stay in 40 years and get a 100% pension.

https://militarypay.defense.gov/Pay/Retirement/

also, murder.

also, murder.

If you are at all educated, you don't have to join the infantry.
I'd like to be a supply sergeant like Don Rickles in Kelly's Heroes.

 

Also, the national pension is meant as an adjunct to plans
put in place by the individual. Most people have savings and
property equity they can also rely on.

You are right that the payout is low in Korea compared to other countries. So is the contribution. Korea's 9% is one of the lowest among OECD countries. The average is actually 18.2%. So obviously that would result in higher monthly payouts. To a point where it actually allows someone to live comfortably.

But it doesn't change the fact that with all the contributions one makes, a better return could be accomplished.
The terms can be also changed at any point and an individual can't do anything about it. Basically if you are under 50, you have no idea when can you retire. The contributions are also likely to increase but the payout is not going to increase at the same rate. Not when the system is out of balance like now in Korea.
And like I wrote, a huge plus for me is that whenever you cease to exist, your family will continue to benefit from your hard work and efforts.

There's always better. One can argue that until the cows come home. The question here is risk. How risky is an annuity backed by the Korean government , not forgetting that as a foreigner you may be last in line when the shite hits the fan, versus taking a lump sum payment and investing it yourself or paying someone to invest it yourself.

I took the lump sum. A former colleague, who was financially well off due to family money and whose brother was a financial advisor, took the pension. He even stayed in Korea a year or two longer to get the pension. There was something about getting a pension that really appealed to him. It could have been that his wife was going to get one from Lufthansa or a point of pride or just emotional. I don't think it was a reasoned financial decision.

It's an individual decision.

There's always better. One can argue that until the cows come home. The question here is risk. How risky is an annuity backed by the Korean government , not forgetting that as a foreigner you may be last in line when the shite hits the fan, versus taking a lump sum payment and investing it yourself or paying someone to invest it yourself.

I took the lump sum. A former colleague, who was financially well off due to family money and whose brother was a financial advisor, took the pension. He even stayed in Korea a year or two longer to get the pension. There was something about getting a pension that really appealed to him. It could have been that his wife was going to get one from Lufthansa or a point of pride or just emotional. I don't think it was a reasoned financial decision.

It's an individual decision.

No OECD country has ever defaulted on the pension component
of its sovereign debt. In fact, this is so important that it is one of
the functions of the IMF to ensure people get their pensions. So
the risk in a pension is almost zero. In fact, as I said above, the
government assumes all market risk.

But you're right. For those who have the option, it is personal
choice.

No OECD country has ever defaulted on the pension component
of its sovereign debt. In fact, this is so important that it is one of
the functions of the IMF to ensure people get their pensions. So
the risk in a pension is almost zero. In fact, as I said above, the
government assumes all market risk.

But you're right. For those who have the option, it is personal
choice.

Past performance is no guarantee of future results. Pension plans will have to be adjusted to align with demographic trends.

They will have to charge slightly more per month to fund it and make a couple of donations to the fund from general revenues to push it forward.  Given how many old voters there are going to be, cutting the pension will be political suicide.  I hope it survives as I will be collecting some of it.  And some from Canada too. 

Something that might be of interest: it looks like it might be possible to count your pension contributions here in Korea towards your Canadian pension:

"If you do not qualify for a Canada Pension Plan benefit based on your contributions to the CPP, Canada will consider periods credited under the pension program of Korea as periods of contribution to the Canada Pension Plan."
https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-international/korea.html

Something that might be of interest: it looks like it might be possible to count your pension contributions here in Korea towards your Canadian pension:

"If you do not qualify for a Canada Pension Plan benefit based on your contributions to the CPP, Canada will consider periods credited under the pension program of Korea as periods of contribution to the Canada Pension Plan."
https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-international/korea.html

This has always been a thing. If you can't take out the lump sum, pensions
are transferrable between certain countries. I think they are The UK and
Canada.

I wasn't aware of that until just recently. It's good to know!

If you don't cash it out, then you will get pension from the Korean government when you are old.  You will also get some from Canada if you worked there too.  If you don't meet the minimum time, then both governments will work to credit your time in the other country to bring you to the minimums.  IE  Korea must pay in for 10 years before being eligible.  If you pay in for 8 years here but paid in for 2 or 3 years in Canada, they'll work to credit each other for your sake.  If you cash it all out when you leave then forget about everything. 

If you don't cash it out, then you will get pension from the Korean government when you are old.  You will also get some from Canada if you worked there too.  If you don't meet the minimum time, then both governments will work to credit your time in the other country to bring you to the minimums.  IE  Korea must pay in for 10 years before being eligible.  If you pay in for 8 years here but paid in for 2 or 3 years in Canada, they'll work to credit each other for your sake.  If you cash it all out when you leave then forget about everything.

Cashing out here doesn't mean forget about everything to me.  Have you spent your whole working life in Korea?  Good God, you really do need to get out of here.  You're not young man.  Go work in Canada and start contributing to the CCP.  I would be terrified if I only had the Korean pension to fall back on.